<DOC>
[109th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:26998.wais]
INTERNET PROTOCOL AND BROADBAND
SERVICES LEGISLATION
=======================================================================
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
__________
NOVEMBER 9, 2005
__________
Serial No. 109-68
__________
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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26-998PDF
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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:
Bowe, Frank G., Professor, School of Education and Allied
Human Services............................................. 125
Clark, Tony, President, North Dakota Public Service
Commission................................................. 130
Ellis, James D., Senior Executive Vice President and General
Counsel, SBC Communications................................ 20
Hassch, Harry, Executive Director, Community Access Center... 134
Kimmelman, Gene, Senior Director of Public Policy, Consumers
Union...................................................... 140
Krause, Tim, Chief Marketing Officer and Senior Vice
President, Government Relations, Alcatel North America..... 24
Mitchell, Paul, Senior Director and General Manager,
Microsoft TV Division, Microsoft Corporation............... 27
Praisner, Hon. Marilyn, Member, Montgomery County Council.... 34
Putala, Christopher, Executive Vice President, Public Policy,
Earthlink, Inc............................................. 41
Rehberger, Wayne M., Chief Operating Officer, XO
Communications, Inc........................................ 64
Salas, Edward A., Staff Vice President, Network Planning,
Verizon Wireless........................................... 69
Wiginton, Joel K., Vice President and Senior Counsel, Sony
Electronics................................................ 147
Willner, Michael S., President and Chief Executive Officer,
Insight Communications..................................... 75
Wilson, Delbert, General Manager, Industry Telephone Company. 150
Yager, James, Chief Executive Officer, Barrington
Broadcasting Company, LLC.................................. 83
Material submitted for the record by:
ADC Telecommunications, statement of......................... 104
American Homeowners Grassroots Alliance, prepared statement
of......................................................... 161
Edison Electric Institute, prepared statement of............. 164
Nichols, Willard R., American Public Communications Council,
prepared statement of...................................... 170
Richardson, Alan H. President and CEO, American Public Power
Association, prepared statement of......................... 185
Wiginton, Joel K., response to questions from Hon. Cliff
Stearns.................................................... 190
Willner, Michael S., response to questions from Hon. Jay
Inslee..................................................... 192
Response to questions from Hon. Cliff Stearns................ 195
(iii)
INTERNET PROTOCOL AND BROADBAND
SERVICES LEGISLATION
----------
WEDNESDAY, NOVEMBER 9, 2005
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Telecommunications
and the Internet,
Washington, DC.
the subcommittee met, pursuant to notice, at 10:11 a.m., at
2123 Rayburn House Office Building, Hon. Fred Upton (chairman)
presiding.
Members present: Representatives Upton, Stearns, Gillmor,
Whitfield, Cubin, Shimkus, Wilson, Pickering, Radanovich, Bass,
Walden, Terry, Ferguson, Sullivan, Blackburn, Barton (ex
officio), Markey, Wynn, Doyle, Gonzalez, Inslee, Boucher,
Towns, Gordon, Rush, Stupak, and Dingell (ex officio).
Also present: Representative Buyer.
Staff present: Howard Waltzman, chief counsel; Neil Fried,
majority counsel; Will Nordwind, policy coordinator; Kelly
Cole, majority counsel; Jaylyn Jensen, senior research analyst;
Anh Nguyen, legislative clerk; Peter Filon, minority counsel;
Johanna Shelton, minority counsel.
Mr. Upton. We have a lot ahead of us, so we are going to
start just a little bit late. I will do my best with the gavel,
remind members later, as they come, that they try to strictly
adhere to the 5-minute rule, for questions as well as the
opening statements. Good morning. Today's subcommittee hearing
is on a staff draft to create a new statutory framework for
Internet protocol and broadband services. The draft would
update our communications laws to keep pace with the dramatic
changes in technology and consumer demand which have transpired
since passage of the 1996 Act. In my opinion, such an update is
long overdue.
In planning the subcommittee's agenda for this Congress, I
wanted to chart an ambitious course for enactment of reform
legislation by the end of this Congress. This year, the
subcommittee has held four hearings on how IP-enabled services
are changing the face of communications and the voice, video,
and data services marketplaces, which only underscores my
desire to get this done in this Congress. Part and parcel of my
desire to enact legislation this Congress, I want this to be
bipartisan legislation. To that end, Chairman Barton and I,
along with Ranking Member Dingell, Ranking Subcommittee Member
Markey, and our staffs, have been working for months in good
faith to achieve bipartisan consensus. And I believe that much
progress has been achieved, and I am encouraged that we will,
in fact, achieve bipartisan consensus.
In light of a dwindling number of days potentially left in
this legislative year, Chairman Barton and I decided that it
was important to move the process along by publicly releasing
this staff draft before us today and holding this legislative
hearing. I appreciate the complete cooperation of both Mr.
Dingell and Mr. Markey on this hearing, which resulted in our
diverse and very lengthy list of witnesses and observers before
us today. And I appreciate all of our witnesses for being here.
I particularly want to welcome Mr. Hap Haasch, who is from my
district in Kalamazoo, for being with us today on behalf of the
Alliance for Community Media.
I want to say that I look forward to continuing our
bipartisan discussions with both Mr. Dingell and Mr. Markey--
not to mention all the members on both sides of the aisle--as
we move beyond this hearing and toward an eventual markup in
this subcommittee and beyond. In order to quell the rumor mill,
let me state for the record that we will not be marking up this
bill next week. It was never our intention to do so, either in
full or subcommittee. But let me make it clear, this bill is
one of our top priorities, and I intend to work with Chairman
Barton to move it. We have examined these issues for almost a
year now, and it is time for subcommittee and full committee
action.
In terms of the substance, this staff draft rightly creates
a new statutory framework for IP and broadband services that
emphasizes a reliance on market forces in this competitive and
dynamic sector, and I want to focus right now on one key
element of that framework. The staff draft before us attempts
to streamline the franchise process for broadband video service
providers in order to expedite the entry of a new, third
competitor into the video marketplace. Such competition, the
sooner the better, will be good for consumers.
Moreover, the staff draft makes sure that if we are going
to depart from the legacy franchise model, that it is for a
service which is different than today's cable service. However,
in creating a streamline franchise process for broadband video
services, the staff draft attempts to preserve critically
important elements of the legacy franchise mechanism, mainly,
(1) a 5 percent franchise fee; (2) PEG carriage requirements;
and (3) an explicit preservation of local government's police
powers related to the orderly and safe use of rights of way,
including the time, place and manner for construction.
In addition, this staff draft not only prohibits redlining,
but also preempts State laws which prohibit municipalities from
building their own broadband networks and offering their own
broadband video services. That way, if a municipality wants to
serve any or all it's citizens, it can do so. And I would ask
unanimous consent at this point to place on the record letters
from the APPA and the Tropos Networks in support of the
municipal broadband provisions in the staff draft.
In closing, I want to stress that this is a staff draft,
and that this public hearing is an opportunity to give members
of this subcommittee and the public a chance to debate and
learn more about the issues. The next step will be an open,
public markup at our subcommittee and then full committee, not
to mention open and public proceedings on the House floor, to
say nothing about this interprocess. Between now and the next
step, we have plenty of work ahead of us. We will continue to
work with members on both sides of the aisle and all interested
parties through the entire process. Again, I want to just
remind my members of this subcommittee that we are going to
limit ourselves strictly to the 5-minute rule, and I have
served a good example by finishing 1 second early. Would
recognize the ranking nmmber of the full committee Mr. Dingell
for an opening statement from the great State of Michigan.
Mr. Dingell. Mr. Chairman, I thank you for your very kind
recognition, and I am pleased to hear you discuss the staff
draft. I am not sure whether you are indicating greater or
lesser enthusiasm for this staff draft than I am. I had
understood that we were working closely together, you, and Mr.
Markey, and my good friend the chairman of the committee. But a
funny thing happened on the way to this hearing, and we now
find that we have a staff draft and all of the work that had
been done by you and I, Mr. Barton and Mr. Markey, appears to
have vanished somewhere into a black hole. I find that this is
somewhat stressful as a trust that we have on this side, or the
feeling that we have that there is a bipartisan effort to
achieve a resolution of a problem, which we all agree exists
with regard to updating the Telecommunications Act to assist us
to have a better ball under which we could work.
In order to assist you and my good friend the Chairman, I
will see that our staff furnishes you and others in the
industry with both our addresses on this side of the aisle and
our telephone numbers so that you may know how to contact us.
And we will also see that we have the different means of
electronic communications that we have made available to you
and to our friends in the industry so that you will know how to
reach us about matters of this kind. We will either also
instruct our staff to see to it that your staff has these
telephone numbers because they appear to have forgotten to
discuss with us the content of this draft. And although I will
observe that parenthetically we were seeking to address these
matters in good faith.
I will be listening during the course of our future
discussions to see whether similar good faith has been
exercised on the Republican side of the committee, and whether
this indicates to us that we may continue to work in a
friendly, harmonious, open bipartisan fashion with our dear
friends on the Republican side.
Having said this, many of us have fought for a long time to
remove barriers holding back competition in voice, video and
broadband markets. The process leading to this draft
legislation started well. In several bipartisan discussions, we
found much common ground. Committee staff worked diligently and
released bipartisan draft legislation in September. That was
not perfect according to the minds of any participant, but it
was progress. It reflected the need to find a meaningful
balance between the policy issues and interests. The initial
draft received mixed reviews and considerable comment, which we
thought we were addressing in a suitable fashion. Yet nearly
everyone appreciated the--process and found the draft workable.
Staff began working on changes as appropriate. With regard to
the initial draft, both the process and the substance were well
on their way to what we thought would be a successful
legislative achievement.
The same cannot be said of this curious staff draft
legislation now before us today. In stark contrast to our
earlier efforts, this process and this staff draft was not
inclusive or bipartisan, and, of course, the resulting product
is, at best, a fine example of the staff's predilection on
these matters. I am extremely displeased at this kind of
behavior by the majority, and I observe that it threatens in a
very significant way what had been a good working relationship
on this matter.
Comparing the two versions, it is clear that changes swing
consistently, if not universally, in the direction of only one
group of affected stakeholders. Most other stakeholders are
worse off. Moreover, the draft before us undermines long-
standing objectives of fostering localism, competition and
diversity. For each of the changes from the earlier bipartisan
staff draft--and there are many--we must ask ourselves does
this--the changes in this staff draft strike the right policy
to usher in competition, innovation and investment that we all
seek, and will this staff draft enable us to complete our
business before the conclusion of this session, because good
will has been somewhat afflicted by the results of these
matters. Will the change have collateral effects on other
parties? Will the change bring predictability and certainty to
the marketplace? Or will it spawn more confusion and
litigation?
In asking these questions, a number of changes warrant
close scrutiny. First, legitimate interests of the cities are
not protected. The franchise fee provisions in the draft no
longer keep our local governments financially whole. Although
the draft retains the 5 percent fee, it alters revenues on
which the fee is paid in a way that could dramatically reduce
revenues to our cities and towns. The rights of way provision
place new restrictions on a city's ability to manage its
property. I would note that this was a matter of importance to
me and my colleagues on this side because we felt that
preserving the cities and their financial affairs intact was an
important part of the resolution of the questions before us.
Second, the draft marks a fundamental shift in basic and
long-standing video obligations enacted to ensure competitive
marketplace requirements that are statutory today, including
must carry, retransmission consent, program excess, closed
captioning, consumer electronics capability and compatibility,
and retail availability are all relegated under the staff draft
to waivable FCC regulations subject to a 4-year review that
could result in their elimination. Does this committee intend
to see this judgment over television policy to the whims of the
FCC where we have suffered mightily over the years?
Mr. Upton. Mr. Dingell.
Mr. Dingell. Third----
Mr. Upton. We--I tried to make it clear that we were going
to try to limit our remarks to 5 minutes, and you are----
Mr. Dingell. You have been----
Mr. Upton. Two-and-a-half minutes over.
Mr. Dingell. You have been kind.
Mr. Upton. Very generous.
Mr. Dingell. I----
Mr. Upton. Yes.
Mr. Dingell. [continuing] hope you realize that my
enthusiasm for the----
Mr. Upton. I just imagine if this had been the real bill.
Mr. Dingell. [continuing] staff draft will be further
emphasized in the balance, but I will commend this reading to
the Chair.
Mr. Upton. I look forward to reading every word.
Mr. Dingell. And I will ask unanimous consent that it be
inserted into the record.
Mr. Upton. I would recognize the chairman of the full
committee, Mr. Barton, for an opening statement.
Chairman Barton. Thank you, Mr. Chairman, and thank you for
holding this hearing. I want to make a few extemporary comments
in addition to my written statement based on what my good
friend Mr. Dingell just said. This staff draft is a staff
draft, but it is a staff draft that I and Mr. Upton approve. It
is not a staff draft that Mr. Markey and Mr. Dingell approve.
That is part of the process. We have worked with Mr. Dingell
and Mr. Markey and their staffs for almost a year now, and
those have been productive discussions, and there has been the
normal give-and-take. There is a disagreement about this latest
draft about when it was finalized, and Mr. Dingell and I are
going to have a meeting on that and some other issues later
this afternoon.
But I don't want there to be any misunderstanding, as
chairman of the full committee, and Mr. Upton is chairman of
the subcommittee, we want to legislate. We want to legislate in
a bipartisan fashion. If you are going to legislate, you have
got to make changes in drafts, and you have got to hold
hearings on them. I made the decision last week that we were
going to hold a hearing this week. Mr. Dingell disagreed with
that decision, not necessarily because he didn't want to hold
the hearing, but because he and his staff had not had time to
have input and make some suggestions about revisions to the
final draft, and that is the right of him and his staff and Mr.
Markey's staff. But you cannot legislate if you don't put it
out to the public.
Now the first staff draft that was put out in September, I
believe, Mr. Dingell said had mixed reviews. Well, he is being
a gentleman about it. It was uniformly knocked. It got nothing
but negative reviews. Nobody was for it that I am aware of.
Nobody talked to me. So we have made some changes, and we are
going to make some changes to this draft. That is what this
hearing is about. And we are going to continue to work with our
friends in the Minority. This should be a bipartisan effort,
but I don't want anybody to be under any misunderstanding. The
Energy and Commerce Committee, as long as I am Chairman, is
about action. It is not about inaction, and sometimes we have
to set timelines, and it is the chairman of the committee that
makes those timeline decisions. So I bear total responsibility,
and I told Mr. Dingell last week--I said, I don't want you to
take any ownership of this if you don't want to. You can call
it just what he just did, and he has got every right to do
that. So I just wanted to set the record straight about that.
Now, in my last 2 minutes and 23 seconds, I do want to
thank you, Mr. Upton, for holding this hearing. We have had
four hearings at your subcommittee on Internet protocol
technology this year. We have heard from dozens of witnesses,
and we are going to hear from several more today. They talked
to us about the effects of new technology on voice, video and
data markets, and they claim, and I believe that they are
correct, that there is a need for a new, clear statutory
framework to govern the delivery of such services.
Our Nation's telephone laws as they are currently
structured are based on the principals of common carriage and
the belief that only incumbents can truly own the facilities
that connect Americans. On the other hand, the notion behind
America's cable law is that competition doesn't exist, and
since no competitive forces check, the action of a monopoly
distributor of multi-channel programming in many markets, that
responsibility must fall to the government. That is why we are
here today.
The advance of technology has left the Law behind. The
statute no longer reflects the technological and competitive
reality. Congress has a responsibility to update our
communications laws. This is one of the committee's highest
priorities. Most of the folks out in the private sector that
our governed by these laws are ready to go to work. If we do
the new law right, there is going to be an explosion of jobs,
growth and opportunity for American workers, and American
consumers will get a wide array of new services that were
unimagined just a few years ago.
As we move forward in this process, I sincerely look
forward to working with all members of the subcommittee and
full committee on both sides of the aisle, especially my good
friends Mr. Upton, Mr. Dingell and Mr. Markey, to try to
perfect this draft. We do want to be bipartisan and we do want
to move a bill. At one time, I had hoped we could move a bill
before full committee this year. I am not sure that that is
going to be possible now, but we can at least hold this
hearing, take more comments, hopefully release another draft,
and then maybe move to a legislative markup in subcommittee,
and depending if we are here in December, we might actually get
a markup in this subcommittee this calendar year.
With that, Mr. Chairman, I am 4 seconds over and I yield
back.
Mr. Upton. Note of the 4 seconds. Recognize the
subcommittee Mr. Markey for 5 minutes for an opening statement.
Mr. Markey. Good morning, Mr. Chairman. On September 15,
after 8 months of negotiations on the part of the staff of
Chairman Barton, Ranking Member Dingell, Chairman Upton, Mr.
Pickering and myself, a bipartisan consensus staff draft was
released. That draft, while not perfect, was balanced and
designed to treat all parties equitably, meaning from the
perspective of all parties, unfairly. It was offered as a
starting point from which we could reflect on suggested changes
from all affected parties and refine the draft through
discussion and continued bipartisan collaboration. I want to
thank Chairman Barton and Mr. Upton for the process over those
months which led to that bipartisan consensus staff draft.
I am dismayed by the process, however, over the last
several days that has led to this hearing and to the latest
staff draft, which is neither consensus nor bipartisan. While I
understand that some may see the unveiling of the new Barton-
Upton draft as moving the process forward, I think it is quite
the opposite. On both the overall substance and the process,
the Barton-Upton draft represents a significant step backward,
and in my view, brings us further away from successfully
legislating in this area, not closer.
The new staff draft eliminates a provision that extended
the prohibition on cable operators and telephone companies
buying each other out in region. This has been the foundation
of competition in this committee for many years. The cable
industry challenges the phone industry, and the phone industry
challenges the cable industry. It is a vital engine of progress
for which this committee has been justifiably proud. While many
of us may lament the prospect of a broadband duopoly in many
communities, at least it is a duopoly. Deleting the provision
which ensures competition between the cable and telephone
industries is a terrible policy decision.
The Barton-Upton draft also reduces the consumer
protections required for national standards by the FCC from 11
areas to 4 area. And it also adjusts the fundamental
definitions in the bill. For example--for instance, the BITS
definition is challenged in a way which raises questions as to
whether re-sellers or aggregators of broadband service have any
rights or any obligations to abide by network neutrality
principles, consumer privacy protections, or consumer
protection rules generally. The broadband video service
definition is changed in a way that makes the platform which
delivers the service a potential vehicle for discrimination.
The Internet is a wonderfully chaotic, open, worldwide
network or platform for innovation and an economic engine for
the country. I don't understand why we would tinker with a
model that has been so widely successfully and embraced by
thousands of companies and millions of individuals, and on it
to slant public policy in favor of three companies simply so
that they can deliver movies to peoples' home. My Own Private
Idaho was a movie. It is not supposed to be an articulation of
America's broadband policy.
The Barton-Upton draft also changes the basis for
calculating franchise fees for municipalities, a shift which
will have negative financial consequences for communities
across the country, and that undercuts financial support for
public access television channels.
In addition, the Barton-Upton draft deleted the placeholder
that had been in the consensus draft that would have addressed
the question of the extent and timeliness of the telephone
companies offering broadband video service to both rural and
under-served urban and suburban communities.
The Barton-Upton draft also departs in a major way from the
consensus draft by changing the obligations of Bell Company
Video Services from statutory responsibilities to mere
regulations. In other words, the rules governing must-carry,
sports blackouts, close captioning, indecency rules, television
content ratings, ownership limits, consumer equipment
compatibility, equal employment opportunity rules, program
access, close captioning and others, can now be waived by the
Commission upon request by the Bell companies.
If that were not sufficient to tilt the playing field
enough, the draft adds an additional provision requiring the
Federal Communications Commission, every 4 years, to eliminate
such any of the rules which it finds in its subjective judgment
that affects meaningful economic competition.
I am willing, as I have been throughout the year, to
negotiate in good faith and to develop a consensus piece of
legislation. I am dismayed that the promising path that the 5-
member offices were on toward that goal has been abandoned in
the last week for what I see as a detour toward a likely
legislative dead end.
I thank the Chairman for calling today's hearing, and I
look forward to hearing from the witnesses.
Mr. Upton. I don't know if I should say thank you or not.
Mr. Whitfield is recognized for 3 minutes for an opening
statement.
Mr. Whitfield. Mr. Chairman, thank you very much, and I
don't think any of us are surprised that you and Chairman
Barton have come forth with a new draft because, as Chairman
Barton accurately stated, there was not anyone that appeared to
be enthusiastic about the last draft. I actually am encouraged
by this draft before the committee today because many of the
provisions set forth offer important guiding principles toward
improving our telecommunication laws in an era where we are
witnessing the convergence of voice, video and data services on
a single platform. Most importantly, the draft creates Federal
standards for the deployment of broadband services, and I
believe that elevating this issue from the local level to the
Federal level accurately reflects the fact of the deployment of
broadband services is a national priority. Without a doubt,
consumers will benefit from these advanced services, and the
draft before us today creates the necessary market incentives
to make this deployment happen. And frankly, Mr. Chairman, I
believe these changes are overdue, as we have witnessed time
and time again by competition in the communications marketplace
will bring much needed technological innovation and growth to
our country, stimulating our economy and creating jobs.
At the same time, consumers stand to reap tremendous
rewards, I believe. It is competition and not excessive
regulation or excessive mandates from the government that will
stimulate lower prices, faster services, and expanded
deployment. Although this draft, I think, has--it is quite
obvious has not yet attained broad bipartisan agreement among
the members of this committee, I do look forward to working
with you and others on this subcommittee and the full committee
to update our Federal communications laws for the Internet age.
And I am optimistic that this committee can do so, and will not
satisfy all of the special interest groups, but will certainly
take into account all of their views and come out with a
balanced final product.
Mr. Upton. Thank you. Mr. Boucher?
Mr. Boucher. Thank you very much, Mr. Chairman. The draft
which is before the subcommittee is a generally well-balanced
proposal, and I think it is a useful starting point for this
subcommittee's work. It requires a regulatory light touch for
Internet applications, much along the line that was recommended
by the gentleman from Florida Mr. Stearns, and by me, in a bill
that we previously introduced.
The draft before us establishes a clear right for
municipalities to offer telecommunication services. Broadband
facilities will define the arteries of commerce in this
century, much as canals, railroads and highways were the
pathways for the economy of earlier eras. For many smaller
communities, the municipal provider of broadband may be the
only provider, or it may be a critical second provider,
assuring that services are affordable. In larger communities,
low-cost WiFi-based mesh networks can assure the wide
availability of wireless high-speed Internet access when
deployed by local governments. The draft assures that
localities can offer these services as long as they abide by
the same rules that they impose on private sector providers.
I think it is essential that we provide franchising relief
for multi-channel video providers if we are serious about
welcoming competition by the telephone companies in this
market. The draft provides that relief while assuring that all
providers pay local franchise fees and offer PEG channels.
While I think the draft broadly strikes the right balance
regarding municipal networks, the scope of permissible
regulation of Internet applications and video franchising, I
have concerns about the way the draft addresses network
neutrality. This provision needs additional work. Following the
Brand X decision and an FCC rulemaking, it is now clear that
broadband platform providers need not accommodate unaffiliated
Internet access providers. In the absence of that open access
for unaffiliated ISPs, the need for a firm network neutrality
provision is all the more apparent. It will be our only
assurance that the Internet remains open and seamless as we
expect it to be, and as the full utilization of that medium
requires that it be.
In simple terms, network neutrality will assure that any
Internet user will be able to reach any website of his choosing
and be able fully to enjoy the services that are offered by
that website without interference by the broadband platform
provider. The platform operator should not be permitted to
manage the network in a manner that favors his content services
to the disadvantage of the unaffiliated content provider who is
Internet-based.
The draft contains ambiguous language that permits the
platform operator to offer enhanced quality of service to
subscribers and to impose compacity limitations on subscribers.
While I acknowledge the need for broadband providers who make
substantial investments in building networks to be able to
offer a high-quality service through their video, their VoIP,
and their other offerings, the language should be modified to
assure that the platform operator cannot interfere with the
delivery of services from unaffiliated Internet websites and
that sufficient bandwidth will be available on the platform to
accommodate the unaffiliated services.
Mr. Chairman, I look forward to working with you and with
the members of the subcommittee and with interested external
parties as we seek to achieve that goal. Thank you, and I yield
back.
Mr. Upton. Mr. Gillmor?
Mr. Gillmor. Thank you very much, Mr. Chairman, and thank
you for holding this hearing. And I want to applaud your hard
work and your leadership, and Mr. Barton's, in developing this
revised draft bill. I also appreciate all the panelists being
here.
Mr. Chairman, we were both members of this subcommittee
when Congress last updated the telecommunications law, and at
that time the Internet was in its infancy, and cell phones were
the size of masonry bricks, and Blackberry was only recognized
as a fruit. None of us could have imagined the technical
advances that have taken place since the Telecom Act of 1996
was signed into Law, advancements such as voiceover Internet
protocol, on-demand media services, wireless web access to even
the most rural of areas have Americans becoming increasingly
dependent on the technology of the present, as they will become
even more so on the technology of the future. And I am pleased
to see that there have been so many positives, so many
bipartisan forward-thinking provisions within this second
discussion draft that attempt to address many of our future
needs.
As we begin the process of updating our current laws, I
think we need to listen to the message that history left us:
burdens from government-imposed regulations smothers the
development of emerging technologies and limits long-term
investment in this sector of our economy. The areas that are
being addressed in the staff draft has become prominent largely
due to government inaction. Recognizing that technological
advancements are the driving force behind the future health of
our Nation's economy, it is vital that we also recognize our
Constitutional oversight authority to make certain that this
segment of our economy continues to grow.
I think, as you do, that we ought not rush this process,
but we have to be sure that we listen to all the stakeholders,
including our constituents the American consumers, to ensure
that we do out best to address the needs of this very fluid
industry and to foster the spirit of competition. So I look
forward to what emerges from these hearings, and, Mr. Chairman,
I did want to commend you for your determination to assure that
America continues to be the bellwether of technological
advancement throughout the global marketplace. And I yield back
all 16 seconds.
Mr. Upton. Mr. Doyle?
Mr. Doyle. Thank you, Mr. Chairman. Mr. Chairman, I have
tried to approach these issues that come before this
subcommittee with the goal of creating telecommunication
policies that will lead to increased competition within
industries and more benefits for consumers.
IP technology has the potential to do just that in no time
at all. This technology will change every aspect of competition
within the telecommunications industry, and it is our job to
see that as the state of competition evolves, we have policies
in place that do not unfairly tilt the playing field in one
direction or the other. Vibrant competition benefits us all
because it benefits our constituents. I have said before that
most of my constituents are probably more concerned about
finding a way to get the same voice, video and data services
they currently get only at a cheaper rate. However, the promise
of IP technology is undeniable. We will see new services like
video and voiceover IP that look, feel and act similar to old
services like cable and satellite television and traditional
phone service.
The question is should we pass laws that treat the
providers of these new services more favorably than we treat
existing providers simply to encourage entry into the
marketplace, or if regulatory obligations are reduced for a new
entrant, should we then go back and reduce these obligations on
existing providers? And if we do either of those things, what
will be the affect on consumers? I look forward to hearing from
out witnesses on this subject because I am reluctant to create
winners and losers in this area simply based upon the services
are delivered to consumers.
I also want to highlight one issue that is very important
to me as a Member of Congress who has 54 separate political
subdivisions in my district, and that is the issue of franchise
agreements. Franchise fees have been an important revenue
source for municipal budgets since the beginning of cable
television. And I know that some of our witnesses feel that the
pace of negotiating franchise agreements can affect your
ability to vigorously compete in the marketplace, however the
system we have in place today ensures that local voices are
heard, and that communities are compensated for the use of
public right-of-ways. If a franchise process is streamlined,
who will my city council members have to call if a problem
arises with a provider? And will there be anyone to answer that
call and give it the attention that it deserves?
I have also heard that in addition to streamlining the
franchise process, this discussion draft could drastically
reduce the amount of money franchise fees generate for
municipalities. A narrow definition of gross revenue that only
includes money collected from subscriber fees and does not
include other generally accepted forms of revenue such as
advertising fees, will cost Pennsylvania municipalities
millions of dollars. This would be a devastating blow to my
district at a time when all of these political subdivisions are
being forced to cut or reduce municipal services.
In closing, Mr. Chairman, I want to thank our witnesses for
agreeing to appear today. I look forward to hearing what they
have to say, and I yield back my time.
Mr. Upton. Mr. Terry?
Mr. Terry. I waive.
Mr. Upton. Mr. Ferguson?
Mr. Ferguson. Thank you, Mr. Chairman. As this country
migrates toward a completely digital communications system, I
think it is important that we provide consumers and
communications providers with legal and regulatory certainty to
continue to offer new and innovative services. This discussion
draft takes an important step toward that goal. Specifically, I
commend you, Mr. Chairman, for your focus on the voiceover IP
technology and Internet telephone providers.
VoIP technology allows any broadband Internet connection to
be a virtual telephone that provides consumers with affordable
and innovative voice services. I know first-hand of the
benefits of this technology for our economy as VoIP providers
like Vonage which has created over 1,600 jobs in my State of
New Jersey. They offer VoIP services as an affordable
alternative to traditional wireline telephone service.
Also of utmost importance is a competitive environment for
consumers, an environment that provides them with the most
options for their dollar, and assures that these new services
are both affordable and attainable. To reach this goal, we need
to establish a framework that ensures a level competitive
playing field for all industries that provide these exciting
new offering. By doing so, we will ensure that the consumer
market gravitates to consumer demands and at the same time
enables the development of sustainable and genuine competition
for all of our constituents.
I look forward to hearing from the witnesses present here
today as to how we can achieve these goals as we move forward.
And, again, I commend Chairman Upton, Chairman Barton, and
others, who have worked on this important next step in the
process. I yield back.
Mr. Upton. Mr. Gonzalez?
Mr. Gonzalez. Thank you very much, Mr. Chairman. And I am
going to be brief, maybe not use--well, I have got 2 minutes so
I will hurry then. But I will be a mind reader today, and I
believe that I can read the minds of all the witnesses and
everybody out there in the audience, and that is how do you
stay out of the line of fire of what is going on up here
regarding process. But please understand how important it is,
please put it in context of where we are coming from on this
particular issue of process.
First of all, process will always determine the end
product. We know that. So it is important that the Minority be
part of the process. Majority does the majority's will and does
rule at the end of the day because they are the majority, but
it does so by respecting the rights of the minority for a good
reason, and hopefully that is what will happen here.
Also understand that this particular staff draft in its
consideration and the hearing today comes on the heels of a
couple of other measures that were considered here, and that
was the Energy Bill #2 and, of course, the Digital TV and
Medicaid legislation which of course we believe was foisted
upon the members of the Minority's side without much input, and
even during the process, we weren't really, truly included in
any significant measure. I don't believe that it is too late.
We are still in the process, and we will jump into the middle
of it even if it is a later stage. And I yield back the balance
of my time.
Mr. Upton. Thank you. Mr. Shimkus?
Mr. Shimkus. I will pass, Mr. Chairman.
Mr. Upton. Ms. Blackburn?
Ms. Blackburn. Thank you, Mr. Chairman. I want to thank you
for holding the hearing today, and I want to thank you, and
Chairman Barton, and your staff for the hard work that has gone
into producing this draft. As you know, my colleague
Representative Wynn and I introduced the Video Choice Act to
streamline the process new entrants must undergo to offer video
service. We believe that cutting red tape will not only lead to
more choices for consumers, but will greatly increase broadband
deployment in the country. It is my hope this draft, the
subsequent bill, and an updated law will provide the needed
relief for all new entrants.
Since the U.S. has fallen to 16th in broadband deployment,
the time to act is now. Today, if the local telephone company
wants to string fiber to the home of every single constituent
in my district and provide high-speed Internet access and voice
telephone service, the company does not need to obtain any
additional authority from the local government. However, under
current law in most States, if that company later decides it
wants to provide video over the same lines, it now has to go
through local video franchising process in each and every
locality. The process will take years; it will cost millions.
In my opinion, it is a process that is counterproductive to
achieving U.S. superiority in broadband deployment, access and
usage. In today's competitive communications world, the local
franchising rules are out of place. The Texas legislature got
rid of them, and now the phone companies are investing more in
Texas, creating more jobs and more competition. Congress should
do the same. Under the committee draft, the localities are
indeed made whole by retaining franchise fees and PEG channels.
Consumers will benefit from having faster, enhanced Internet
access, competitive video service, more choice at lower cost.
Local governments will have more revenue. It is the right
policy and we should move quickly to make sure that franchise
reform is adopted during this Congress.
I look forward to hearing from our panelists.
Mr. Upton. Mr. Inslee?
Mr. Inslee. Thank you, Mr. Chairman. You know, while we are
having this convergence in the industry in telecommunications,
we would like to see some convergence in the Republican and
Democratic parties. And I think that is very important in
telecommunications policy for the long run, and that is why,
although I am dismayed at the moment, I am hopeful that that
will continue because I think it is very important that this
industry, and the tremendous creative abilities it represents,
are not disadvantaged ultimately by some partisan divide. So I
hope this discussion continues.
I want to make a couple comments about this draft. It is
encouraging, I think, that there is some streamlining of the
video franchise process. The competition in that marketplace, I
believe, will benefit consumers. It is my hope that this market
will drive a more robust broadband deployment. With that,
though, I urge my colleagues to seek a franchise policy that
really does keep local governments whole and maintains local
government control of the rights of way.
Second, one of the most important and positive aspects of
this draft, I believe, is the provision seeking to maintain
America's Internet freedoms. Section 104, which is called the
Net Neutrality Requirement, will help to ensure that Americans
have unfettered access to the greatest possible choice of legal
Internet content and services, and can connect any un-harmful
device of their choice to the broadband network. This
connectivity principle enshrined in this provision is good, but
they must be further strengthened to give Americans an air-
tight guarantee to Internet freedom. Internet access through a
broadband video service is still Internet access, so it should
also adhere to these Internet freedom requirements.
Third, our concerns that much of the broadband regulations
imposed in Internet services may unnecessarily capture services
that do not need to be regulated. We should not regulate
Internet services such as Google, Yahoo, Amazon or MSN. These
hereto four unregulated services, such as free email, have made
use of the Internet but have not made the actual connection to
the consumer. We should be careful not to regulate any service
that is not a substitute for capabilities to send and receive
voice communications.
With that, I look forward to restoring the bipartisan
tradition in this industry. Thank you.
Mr. Upton. Mr. Sullivan?
Mr. Sullivan. Thank you, Mr. Chairman.
Mr. Upton. You need to hit the button.
Mr. Sullivan. Thank you, Mr. Chairman. It has been a long--
this--I thank you for holding this hearing. It has been a long
time coming. The Internet has revolutionized our lives. It has
had a dramatic impact on the way we communicate, and our laws
must reflect those changes. Services based on Internet protocol
are the wave of the future, and we can't bury our heads in the
sand. We must address the public policy concerns this
technology raises within the telecommunications industry.
The regulatory and technological world we face today is not
what we faced 10 or 15 years ago, and that is a simple fact. I
am pleased that this draft addresses consumer protection
standards and ensures access to customers regardless of income.
Also PEG requirements in this draft are comparable to current
service providers, and the draft continues the current
management of right-of-way. This is critical for our
communities to have control over their operations, and it has
appropriately been addressed in the language before us.
The ability for IP to enable so many diverse technologies
is a huge benefit for my constituents and all Americans.
Competition--fair competition drives innovation by driving down
prices and increasing choices for consumers. Any barriers that
impede competition should be eliminated. The fact of the matter
is these technologies will affect us all. You, me, all of my
constituents, everyone will benefit. The free market works if
we will let it.
I look forward to the testimony and I yield back.
Mr. Upton. Mr. Gordon?
Mr. Gordon. I am ready to listen to the witnesses, Mr.
Chairman.
Mr. Upton. Mr. Towns?
Mr. Towns. Thank you very much, Mr. Chairman, to provide us
an opportunity to get some additional information. As we stand
on the verge of realizing the competition we had all envisioned
in 1996, I am anxious for everyone to benefit from current and
future technological innovations. It is great to see the
technology communities spurring the competition that the market
needs, and we should strive for a regulatory framework that
encourages it. By having multiple interests into the video
services market, customers will have more benefits, positive
investment in networks will be encouraged, and more jobs will
be created. I am eager to see a widespread deployment of the
technologies we have been discussing over the past year.
The services and devices that have been shown to be are
incredible, and their availability to everyone in every
community is vital. I am confident that our industry friends
recognize this and will govern themselves accordingly. My
constituents are excited about the communication technologies
that exist today and want to see more innovation, more choice,
and, of course, lower prices in the future. I am pleased that
the cable companies are aggressively competing against the
Bells for telephone products, and that companies like Verizon,
SBC, have plans to compete against the cable for video
services.
But for this innovation to occur, Congress needs to set the
rules of the road, and we need to get it right the first time
to prevent accidents. I hope we can advance this issue
properly, and more importantly, in a bipartisan manner, Mr.
Chairman. Let us keep in mind we should not create a regulatory
burden that stops technology from initially reaching our
constituents, but we must create a playing field that is level.
We don't want winners and losers.
So on that note, Mr. Chairman, I yield back, and I am
anxious and eager to hear from the witnesses.
Mr. Upton. Mr. Bass? Mr. Stearns?
Mr. Stearns. Thank you, Mr. Chairman, and I thank you for
holding this hearing. It looks like you have a full house here,
and I notice they are outside standing in the hallway. This is
reminiscent of the Telecom Act of 1996. And I suspect after
your first draft in September, you got everybody's notice, and
now with the second draft, there seems to be more concern. But,
I want to compliment you because myself and the staff had some
concerns about the first draft, and they are significant
changes, we felt, and we helped bring about, and so I want to
thank you for some of those changes. I think in the end what
most of the people in the audience are concerned about is
regulatory certainty and legal certainty, and that any business
would appreciate because they can't invest the capital unless
they are pretty sure that they have this certainty. And so it
is important that we continue to have these hearings, and I
compliment you in having all of these panelists because a lot
of members who won't be here, I say to the audience, will be
listening to them in our offices because of the importance of
this bill.
For the past couple years, my colleague Mr. Boucher and I
have been working on getting new treatment for IP-enabled
services and TV, and to a certain extent, we think we can
accomplish these goals. I think to a larger degree the staff
draft takes a significant step, as I said earlier, in this
direction, but obviously I think we can still make
improvements. I think my colleague--I agree with him when he
contends that the Net Neutrality Standards in this draft should
be strengthened. It is important to all of us. But, again,
without this certainty and without this regulatory certainty
and this legal certainty, we as Members of Congress will not
give the industry the ability to innovate.
And I have also said, Mr. Chairman, with the high-
definition television, third generation wireless and broadband,
that this economy will be transformed into a whole new economy,
and the GDP will go forward at quantum jumps, and it will have
a higher standard of living for all Americans. And this bill
and what you are doing today, Mr. Chairman, is going to do
that. So in a larger extent, this hearing today with all these
panelists--witnesses, is really creating a higher standard of
living for all of Americans and creating more jobs, higher
paying jobs, and ultimately making this country more
competitive. And I thank you, Mr. Chairman.
Mr. Upton. Mr. Rush?
Mr. Rush. Thank you, Mr. Chairman. Mr. Chairman, we have
got a platoon of witnesses before the committee today, and I
just want to reiterate and state without any unclarity that my
position is that every crook and cranny of this nation should
have access to the Internet services. And with that, Mr.
Chairman, I will pass on my statement--on my official
statement.
Mr. Upton. Mr. Pickering?
Mr. Pickering. Thank you, Mr. Chairman. And I want to thank
the panelists and everyone that has been working on the two
drafts. Let me say to my friends on the other side, there are
many issues on the committee where we are simply not going to
agree and will have philosophical and partisan differences. But
the history of this committee has been on telecom that we have
been able to work things out in a bipartisan way, whether it is
energy, environment or health care, those are areas that
perhaps we have irreconcilable differences. But on this
particular area, telecom, where we have had some great
accomplishments, I still believe that we can and should work in
a bipartisan basis. For 7\1/2\ months, staffs worked on the
first draft, and sometimes when you work in that way and you
try to do it as a member-led process, versus an industry-led
process, the first reaction from industry is that no one likes
it. Now you could say that is a good and fair thing, or you
could say maybe we got it wrong. What we hope is in these
hearings is to learn the differences between the first two
drafts, use this draft and the first draft as a catalyst to
reach consensus. I do hope, Mr. Chairman, that we reestablish
and reengage in the bipartisan process of working together to
find the common ground as we go forward.
And let me set forward the principles that I hope that our
process and our work will lead us to. It should be driven to
establish clear preemption policy, clean entry policy,
competition not just for one sector of communications but
competition to expand and thrive in each sector of
communications, and that we find a way to do that in a
competitively neutral and a technologically neutral way. I do
think that we can find that common ground. I think the bill
makes improvements as we look at telco entry into cable and
into video, and in that market, that will expand competition.
At the same time, I have concerns that if we do not have a
clear interconnection standard, or interoperability standard,
that we will not have the corresponding ability to maintain
competitive markets in voice and in data. It is very important
that as we look at the engines of innovation and investment and
competition, the Internet providers, whether they are content
or whether they are voice, that we make sure that they are not
subject to tolls or fees or the Internet freedom and that they
still can provide competition both to video and telcos.
At the end of this day, we want to say we have deregulated.
We have set a cleaner policy, a clearer policy, but we have
increased competition. And by increasing competition, you will
increase investment and innovation in each sector. Those are
the goals and the principles that I will be going by, and I
think that this committee, whether it is energy or healthcare
or whatever we have tried to do, the Chairman has tried to take
a principle approach of increasing competition wherever we make
policy. And I think that if we do that, we will come out ahead
for the American people and for this committee, and we should
not simply try to please one sector while leaving out every
other sector.
So that is the guidepost that I will be using, and I look
forward to working with the Chairman and the rest of the
committee with that bipartisan process and with those
principles. Thank you, Mr. Chairman.
Mr. Upton. Mr. Stupak?
Mr. Stupak. Thank you, Mr. Chairman. This subcommittee has,
and will continue, to have disagreements about policy issues,
but we have largely kept partisan politics out of this
subcommittee. It is a tradition we can be proud of, and I look
forward to working with my colleagues on this draft as the
process moves forward.
I believe from our subcommittee hearings, as well as my
many rural caucus forums, that we have a delicate job ahead of
us. We must draft legislation in a way that doesn't overly
burden our brightest innovators with laws that can't possibly
change as fast as they innovate, but, at the same time,
respects the importance of cities' and States' consumer
protection laws and social obligations, including Universal
Service Fund on which our communications law has been built.
In addition, we won't have done our job if any rewrite
doesn't recognize the special needs and challenges of rural
communities and communication providers who serve those
communities. Broadband is critical for our children, our
hospitals, our public safety officers, and our businesses to
thrive in the 21st Century. Our rural communities understand
this as much as anyone. But while the commitment to rural
communication providers and community leaders is unlimited, the
resources are not. Congress has a duty to match rural America's
commitment. It is clear that we must do better. Despite
advances in new technologies to help bridge the digital divide,
broadband is still vastly under-deployed in rural America.
The Communications Act of 1996 did a lot of great things.
It spurred competition and brought us to where we are here
today. Cable, phone, wireless competing and offering better
services. The 1996 Act also expanded the Universal Service Fund
to bring broadband to community hospitals, schools, libraries,
and it is time we take another look at the fund. USF faces
challenges from the growing demands on the fund and a shrinking
pool of contributors. We have to meet those challenges head-on.
While the staff draft directs the FCC to study expanding
the contribution base to include VoIP providers, I believe the
language could be stronger to reflect the importance of the
fund for rural America. I believe this draft is a good first
step, but we need to be careful not to let the process get
ahead of policy. That is why I look forward to hearing from our
witnesses today and in the coming weeks about how we can refine
the draft to better meet the needs of consumers, set out fair
and clear rules, and promote competition. I look forward to
working with the chairman, and Ranking Member Dingell, and my
colleagues on the committee, to make sure that all communities,
large and small, urban or rural, are connected to the future.
Thank you, Mr. Chairman. I will yield back.
Mr. Upton. Thank you. Ms. Wilson?
Ms. Wilson. Thank you, Mr. Chairman. I think it is pretty
clear that we are on the cusp of returning to a duopoly in
wireline service which makes any revisions that we undertake in
the Telecom Act particularly important, and I think we need to
very carefully think about the direction we are going on.
The draft that we now have is a significant departure from
the one that we saw earlier in the year, and that concerns me,
particularly as the one that we saw earlier in the year, I
think, was a bipartisan draft. And it concerns me if we move
forward too quickly based on this current draft--piece of
legislation and the imminent approval of the mergers of four
large telecommunication companies into two huge
telecommunication companies for wireline.
I would also like to look at these problems and these
issues from the perspective of consumers, and consumers have
benefited tremendously from competition in telecommunications.
We need to make sure that competition continues to be what
drives innovation and low prices, and anything we do in the
Telecom Act has to have that first and foremost.
And I yield the balance of my time.
Mr. Upton. Mr. Wynn?
Mr. Wynn. Thank you, Mr. Chairman. Mr. Chairman, with your
indulgement, I am going to defer my opening statement, but I
would like to take a moment to recognize one of the outstanding
local officials from my district, the only woman on the panel
before us today, the Honorable Marilyn Praisner. She is here
wearing many hats. She is speaking on behalf of the National
Association of Telecommunications Officers and Advisors, the
National League of Cities, United States Conference of Mayors,
and the National Association of Counties and Telecommunity. And
I think that that reflects the fact that she has exercised over
the years a great deal of leadership nationally as well as
locally on telecommunication issues. I have had conversations
with her about aspects of this bill and they have been very
productive conversations. I know she is concerned about
protecting the interests of local governments, particularly
their revenues, their management of rights-of-way, and
protecting consumers interests. I am sure she will share those
views with the committee and we will be better for it. But I
just wanted to say we are in the presence of an outstanding
American and local leader, the Honorable Marilyn Praisner.
Thank you for joining us today, Ms. Praisner.
Mr. Upton. Gentleman yield back his time?
Mr. Wynn. Mr. Chairman.
Mr. Upton. Gentleman from Indiana?
Mr. Buyer. I would ask unanimous consent for me to
participate in this hearing to ask questions of the witnesses
to give an opening statement.
Mr. Upton. Any member have an objection? Hearing none, the
gentleman is recognized for an opening statement for 3 minutes.
Mr. Buyer. Thank you, Mr. Chairman, not only for your work,
but also that of the ranking members and their staffs. I agree
with my colleague Mr. Towns when he has talked about getting it
right, and I would say to my friend, Ms. Wilson, part of the
problem we have--I don't even want to call it a problem--part
of the concern that you may have about you see major industries
coming together, we caused that, because we over-regulated on
voice and we deregulated on video. The deregulation on video
spurred innovation and competition. There is an explosion based
on conversions technologies and consumers are beginning to
benefit. A the same time, you have got this over-regulation
that Congress put place on voice and it has created great
pains, so these are going to survive if--and they are going to
try to be innovative themselves. So as we move forward, I agree
with my friend Mr. Pickering when he laid out some of his
themes or principles because I have mine too, and that is
respect the free markets. You do that to ensure a forum that is
open, fair and competitive. (2), we need to deregulate for
economic security, and that means that the pathways to foster
innovation and competition. (3), I agree with themes that are
being used out there in industry and around the hill, and that
is to--if you must regulate, then do so on service, not on
technology. And that is the error that we made back in the
first Telecom Act. And I also agree with the theme about
regulating on parity. Also about the empowerment of consumers
to ensure there is choice. And, in fact, making sure that we
have a good balance between our Federal and State jurisdictions
on the consumer protection, and who are we--how are we going to
increase the access and who all will participate in the USF.
Last, I would mention is with regard to franchise fees.
These franchise fees should not be an entry barrier to the
marketplace. At the same time, I would think that cable would
love to end what is happening out there in all these little
towns and cities all across America whereby you enter the
renegotiations and, oh, by the way, we need you to do this. We
need some upgrade at the park. Can you help us with this and
that? And they slip you the list. If that isn't as close to
blackmailing the marketplace, I have never seen it. So I am
sure that you would love to end that out there, and, you know,
I am intrigued and I like what Florida has done.
I mean, Florida has an entertainment tax. We call it a fee.
But if you just go to a straight fee on entertainment and let
everybody openly compete, it has some attractive features to
it.
So let me be circuitous and I will end where I opened, and
that was with Mr. Towns' comments on getting it right. I want
to thank all the witnesses for being here. I want to thank the
committee staff. I--on the other side of Ms. Wilson, I was
concerned about the first draft, so I think the second draft is
a much more improvement than the first draft, but we still have
a way to go, and I appreciate your being here, and let us keep
it going. Yield back.
Mr. Upton. Thank you, Mr. Buyer. At this point, we are
ready for our opening statements. Hooray. We are welcomed by
Mr. Jim Ellis, Senior Executive VP and General Counsel of SBC;
Mr. Tim Krause, Chief Marketing Officer and Senior VP of
Government Relations of Alcatel North America; Mr. Paul
Mitchell, Senior Director and General Manager, Microsoft; the
Honorable Marilyn Praisner, Member of the Montgomery County
Council, Montgomery County, Maryland; Mr. Christopher Putala,
Executive VP of Public Policy for EarthLink; Mr. Wayne
Rehberger, CEO of XO Communications; Mr. Edward Salas, Network
Planning for Verizon Wireless; Mr. Michael Willner, President
and CEO of Insight Communications, New York; Mr. James Yager,
CEO of Barrington Broadcasting Company on behalf of the
National Association of Broadcasters. Welcome you back as well.
Ladies and gentlemen, we are prepared for your opening
statements. I very much appreciated the opportunity to peruse
them last night, and for a lengthy period of time, so thank you
for getting them to us in advance. We will try to adhere to the
5-minute rule to our ability. I would note we are expecting
votes about 11:45, so we will go as far as we can.
Mr. Ellis, we will start with you. Your statements are made
part of the record in their entirety, so go ahead, Mr. Ellis.
STATEMENTS OF JAMES D. ELLIS, SENIOR EXECUTIVE VICE PRESIDENT
AND GENERAL COUNSEL, SBC COMMUNICATIONS; TIM KRAUSE, CHIEF
MARKETING OFFICER AND SENIOR VICE PRESIDENT, GOVERNMENT
RELATIONS, ALCATEL NORTH AMERICA; PAUL MITCHELL, SENIOR
DIRECTOR AND GENERAL MANAGER, MICROSOFT TV DIVISION, MICROSOFT
CORPORATION; HON. MARILYN PRAISNER, MEMBER, MONTGOMERY COUNTY
COUNCIL; CHRISTOPHER PUTALA, EXECUTIVE VICE PRESIDENT, PUBLIC
POLICY, EARTHLINK, INC.; WAYNE M. REHBERGER, CHIEF OPERATING
OFFICER, XO COMMUNICATIONS, INC.; EDWARD A. SALAS, STAFF VICE
PRESIDENT, NETWORK PLANNING, VERIZON WIRELESS; MICHAEL S.
WILLNER, PRESIDENT AND CHIEF EXECUTIVE OFFICER, INSIGHT
COMMUNICATIONS; AND JAMES YAGER, CHIEF EXECUTIVE OFFICER,
BARRINGTON BROADCASTING COMPANY, LLC
Mr. Ellis. Mr. Chairman Barton, Chairman Upton, Congressman
Dingell and members of the committee, good morning, and thank
you for the opportunity for SBC to present its views on the
staff draft.
Today competition and innovation have unquestionably
changed the way we communicate, the way we use the Internet, in
fact, even the way we watch television. It is happening in a
continual pace, and it reflects the marketplace conditions that
exist today. But despite these great strides, much of our
industry remains subject to a shifting regulatory environment
that inevitably is going to threaten some of this progress in
various ways. That is why we support the staff draft.
We believe it puts in place a more predictable national
framework that will be important to the next generation
services and networks. The staff draft reflects an important
fact, a reality, and what is important to the future is less,
not more, regulation. We have any number of examples from our
industry that make that very clear. If you look at wireless,
that is an opportunity where there was no pervasive regulation.
The result has been an absolute flourishing of opportunity and
new services in the wireless business. We have gone from 30
million subscribers just 10 years ago, to over 200 wireless
subscribers in this country. There are more wireless phones
today than there are wired phones. Rates have gone from 50-60
cents a minute not many years ago to pennies today.
The same thing has happened with respect to the broadband
market. It didn't exist a few years ago, but we have seen it
flourish with very light regulation, both by the States and at
the Federal level. Today broadband services are--roughly 40
million subscribers have broadband services, and the rates
reflect a decrease from $40-50 not many years ago to less than
20 today by SBC and a number of providers.
Voice over the Internet services, VoIP, same thing. Minimal
regulation. The service is flourishing. One incumbent that
hasn't been around very long has 1 million customers. Some say
Skype is adding 100,000 a day around the world. That is the
reality of the marketplace. Even with respect to traditional
telephone services where the regulations encourage entry
without legacy--burdening the new entrants with legacy
regulations, have had a dramatic impact. We have seen that in
long-distance. In 1984, $20 got you 50 minutes of long-
distance. Today, that same $20 will get you unlimited long-
distance. Same thing with respect to the whole package of
local, long-distance and vertical services. In the last 5
years, those rates have gone down 30 to 40 percent when you
include the bundling discounts.
The one area where we have not seen competition be in any
way affected--it has been impervious to competition--is the
video services market. It has been 20 years since we had the
Cable Act. In that 20 years, there has not been a single
movement to have affective transformative competition in the
video services market. Since 1995, video/cable rates have
increased by 80 percent since 1995. In the last 5 years, they
have gone up 40 percent. That is three times the Consumer Price
Index. And, unfortunately, the trend continues. In 2005, there
have been more increases.
This is why this legislation is important--the legislation
as proposed. And I would also say it is also reflected in the
Blackburn-Wynn and in the Boucher-Stearns bill. It all reflects
that reality of marketplace experience and the importance of
seeing to ease of entry of new competitors and without the
burden of legacy regulation.
SBC today is in the process of adding to its broadband
network. We are going to spend $5 billion over the next 3 years
to expand our broadband capability. We are going to do so to
offer a number of applications. But, in particular, we will
compete with the entrenched cable TV operators in our
territory. The legislation is important to encourage that. We
particularly think it is important in that it provides our
right to enter that market on precisely the same set of rules
that cable had when they came into telephony, namely without
the burden of the legacy regulations.
We thank the committee staff, the members for their work on
this important piece of legislation. We hope you act promptly
on the legislation. Thank you.
[The prepared statement of James D. Ellis follows:]
Prepared Statement of James D. Ellis, Senior Executive Vice President
and General Counsel, SBC Communications Inc.
Good morning. Thank you, Chairman Upton, and members of the
committee for offering me the opportunity to speak with you today about
the committee's draft reform bill. My name is Jim Ellis, Senior
Executive Vice President and General Counsel for SBC Communications
Inc.
Two benefits of the bill stand out. First, the bill would establish
a single, nationwide policy for the provision of broadband services,
including VoIP. Second, the bill would tackle the issue of the extent
to which cable franchise regulation, designed for the incumbent cable
operators when they entered the market as monopolists, should apply to
next-generation video services. By eliminating legacy franchise
regulation for these broadband providers, the bill would create
incentives for broadband investment, innovation and competition.
It is with respect to this critical issue of video competition
where further illumination is particularly warranted. SBC is making
massive investments to continue its transformation from a local phone
company to a global provider of advanced network capabilities and
innovative services. A critical part of that transformation is SBC's
entry into the video services market. Over a powerful new upgrade to
its broadband networks, SBC will begin offering a next-generation video
service that relies on Internet Protocol or ``IP''--the language of the
Internet--and that will compete directly with, and we believe
outperform, existing cable services. In doing so, SBC will not only
offer consumers something they do not have today--a truly potent
alternative to the cable incumbents--but also greater access to the
newest in broadband technologies and services.
Such an enterprise is not without substantial risk. Accordingly,
any progressive legal regime should not impose on SBC and other new
entrants legacy franchise rules designed for cable incumbents when they
entered the market as monopolists. Doing so would utterly suffocate
this much needed competition. Instead, the model should be cable's
entry into the voice market using IP technology--known as ``VoIP.''
There, cable faces none of the pervasive legacy regulation imposed on
traditional voice service providers like SBC. As a result, cable VoIP
is thriving and poised to become a mighty competitive force.
As we sit here, SBC engineers and construction crews are building a
new addition to SBC's extensive broadband networks. We call this
Project Lightspeed. It is a $5 billion capital project that will drive
40,000 miles of additional fiber into SBC's networks and result in an
advanced, broadband network that relies on IP technology. Over it, SBC
will offer an integrated suite of voice, Internet access, data and
video services. In just its initial phase, Project Lightspeed will
extend to approximately 18 million households. This is the fastest and
most aggressive deployment plan of its kind.
One of the next-generation products that SBC will offer is an
interactive, two-way, IP-based video service that will be unlike--and
better than--the cable services available today. SBC's network will
not, as cable systems do today, simply broadcast hundreds of channels
to each customer's home for descrambling in a set-top box. Rather, SBC
will give customers unprecedented control over the way they watch TV.
This will mean three things to the consumer:
First, the ability to interact in real time with the system to
control the viewing experience. Subscribers will, for instance,
eventually be able to watch a baseball game from multiple
camera angles or watch several games live on the same screen.
Or, the customer will be able to pause live TV, skip to more
detailed information about the product being advertised at that
moment, and then pick up the program where she left off.
Second, integration of the video experience with other services.
Because the video service will communicate with other IP-based
services, customers will be able to display on the TV secure,
customized Internet content, such as real-time stock quotes or
sports statistics, or display on the family's dedicated TV
channel digital photos stored with SBC's Internet access
service.
Third, control over the video service, not just with a remote
control, but with other IP-based devices. For example, Project
Lightspeed will eventually allow a customer, while away from
the house, to use a mobile phone to alter parental controls, or
tell the system to record a favorite show.
In short, this is not plain-old-cable. It is a game-changing
alternative to traditional cable service, and comes at a time when
choice is much needed in the video marketplace.
More than twenty years after the Cable Act, and notwithstanding the
introduction of Direct Broadcast Satellite or ``DBS'' service, the
video distribution market has yet to witness transformative
competition. Cable prices have been rising over three times as fast as
the Consumer Price Index (``CPI'').<SUP>1</SUP> And that trend
continues: 2005 has already seen another round of price
hikes.<SUP>2</SUP>
---------------------------------------------------------------------------
\1\ U.S. General Accounting Office, Report to the Chairman, Comm.
on Commerce, Science, and Transportation, U.S. Senate:
Telecommunications, Issues Related to Competition and Subscriber Rates
in the Cable Television Industry, at 20 (Oct. 2003), available at
http://frwebgate.access.gpo.gov/cgi-bin/
useftp.cgi?IPaddress=162.140.64.21&filename =d048.pdf&directory=/diskb/
wais/data/gao (``2003 GAO Report'') (finding that cable rates have
increased approximately 40 percent over a five-year period compared to
the approximately 12 percent increase in the Consumer Price Index).
\2\ See, e.g., Tony Gnoffo, Dissecting Comcast's Rate Hikes,
Philadelphia Inquirer, Mar. 13, 2005, available at 2005 WLNR 3875285
(discussing rate hike taking effect in March and noting ``[f]or
Comcast's customers, rate increases have become an annual affair. Their
regularity and steep trajectory--about 6 percent a year since 2001--
have been a sore point.''); Charter to Increase Some Rates Starting
Next Month, Kalamazoo Gazette, Feb. 11, 2005, available at http://
www.mlive.com/news/kzgazette/index.ssf?/base/news-12/
1108138819196880.xml; Greg Edwards, Comcast Raising Cable Rates,
Richmond Times-Dispatch, Dec. 7, 2004 (Comcast has announced rate
increases for its Richmond customers ranging from 5.9% to 9.9% for
standard analog service); Peter J. Howe, Comcast Will Raise Cable Rates
in January, Boston Globe, Nov. 24, 2004; Carolyn Said, Comcast to Raise
Prices by 6 Percent Jan. 1, San Francisco Chronicle, Nov. 25, 2004;
John Cook, Comcast Plans to Raise Cable TV Rates, Seattle Post
Intelligencer, Nov. 24, 2004.
---------------------------------------------------------------------------
It does not have to remain this way. In 2003, the GAO found that
the rates of cable incumbents facing competition from a wire-based
video provider are approximately 15 percent lower than in the absence
of such competition.<SUP>3</SUP> A 2004 GAO report similarly found that
the entry of a broadband service provider offering video service
``induce[s] incumbent cable operators to respond by providing more and
better services and by reducing rates and offering special deals.''
<SUP>4</SUP>
---------------------------------------------------------------------------
\3\ 2003 GAO Report at 3, 10. Accord, Video Choice Act of 2005, S.
1349, 109th Cong., 1st Sess. 2(3) (2005) (citing GAO finding).
\4\ U.S. General Accounting Office, Report to the Subcomm. on
Antitrust, Competition Policy, and Consumer Rights, Comm. on the
Judiciary, U.S. Senate: Telecommunications, Wire-Based Competition
Benefited Consumers in Selected Markets, at 12 (Feb. 2004); see also
id. at 15 (finding that ``the monthly rate for cable television service
was 41 percent lower compared with the matched market, and in 2 other
[broadband service provider] locations, cable rates were more than 30
percent lower when compared with their matched markets'').
---------------------------------------------------------------------------
SBC's Project Lightspeed is exactly the kind of wire-based
competition that--according to the GAO and, frankly, common sense--will
finally and truly challenge the chokehold that the incumbent cable
operators have in this market.
But entering the video services market to take head-on an
entrenched, incumbent cable operator is a risky and costly enterprise--
even under the best of circumstances. It requires enormous investment,
which SBC is making without the assurance of a single customer. It is
critical, therefore, that laws and regulations designed to protect the
incumbent cable provider do not so increase the risk and cost for new
entrants that competition is stopped in its tracks. That is, SBC seeks
for its IP-based video service the same treatment that the cable
companies enjoy when rolling out IP-based voice services: Freedom from
legacy regulation designed for incumbents.
As I mentioned, SBC is not building a cable system or offering
traditional cable service; thus, it is not subject to the existing
cable franchise regulations in the Act. Nonetheless, it is clear that
the incumbent cable operators will seek to impede our entry by doing
whatever they can to ensure that we face additional, city-by-city
franchise requirements. If they are successful, this nascent video
competition may well be snuffed out. SBC would, for instance, have to
negotiate some 2,000 separate franchise agreements--each of which would
take an average of 12-18 months to obtain--in order just to complete
its initial three-year deployment plan. And, the franchising
obligations will differ from municipality to municipality, making it
not only enormously expensive but also entirely impractical for SBC and
other new entrants to build out region-wide networks. Having to meet
these requirements will radically change the already challenging
financial calculus in deploying these IP-based networks and services.
Lawmakers and other policymakers can best foster what promises to
be unprecedented competition in the video market by taking steps to
ensure that IP-based competitors, and indeed new entrants in general,
are not saddled with unnecessary and nefarious legacy cable franchise
regulations.
You are likely to hear claims that SBC wants to avoid cable
franchise regulation so that it can serve just a select few customers.
Don't believe this empty rhetoric. Our Project Lightspeed deployment,
in just its initial phase, will reach millions of households in our
territory--households that touch all different demographics. And,
precisely because SBC is so serious about offering a robust alternative
to cable, SBC is preparing to roll out an additional broadband video
service called HomeZone. The service will for the first time integrate
satellite video with powerful wire-based broadband capabilities. It
will have many of the features of our IP-based video service and
ultimately can be made available to every household in SBC's service
territory that has access to our DSL service--that's some 80% of the
households in our territory. SBC's goal is no less than to offer a
broadband-based, next-generation alternative to cable across our
territory.
Please make no mistake about: Video policy is broadband policy. The
economics of deploying next generation broadband networks like Project
Lightspeed rest heavily on the ability to capture video revenues.
Therefore, Project Lightspeed is a broadband story, as it will enable
greater bandwidths and a host of services, not just IP video, over a
single platform. With the U.S. lagging behind other industrialized
countries in broadband deployment, consumers and communities can only
benefit from the type of network investment that will be made possible
by robust video competition. The stakes simply could not be higher.
Mr. Upton. Thank you. Mr. Krause?
STATEMENT OF TIM KRAUSE
Mr. Krause. Chairman Upton, Ranking Member Markey, and
members of the subcommittee, thanks for the opportunity to
appear here today regarding the BITS Act. Alcatel endorses this
legislation and requests the committee move it forward in the
legislative process without delay.
Alcatel is also a member of the Telecommunications Industry
Association, and Alcatel believes the bill was consistent with
the TIA's convergence and broadband deployment policies. While
Alcatel is a global company with 56,000 employees in 130
countries, it actually has almost 9,000 here in North America
and has made over $17 billion in technology investments here.
The North American market is vital to Alcatel and the entire
technology industry because it is here that consumers are most
demanding. And as a result, this market leads the world in
innovation. That is why Alcatel's global R&D centers for IP
routing and enterprise applications are based in California,
and our global R&D center for fiber to the home technologies
are based in North Carolina. Alcatel's the leader in broadband
access technologies with over 70 million digital subscriber
lines shipped to service providers. Alcatel's been selected by
SBC as its primary network infrastructure and video integration
supplier for Project Lightspeed. It is also involved with
numerous other telecommunications companies in the U.S. and
around the world who are at various stages in their own plans
to deploy broadband video services.
The new broadband networks Alcatel will build for these
companies are not mere conjecture. They are reality. We have
all read the statistics. The U.S. is not the world leader in
broadband deployment, either in terms of penetration or
bandwidth. We think by creating a legal framework for the
continued emergence of IP-enabled services going forward, we
have the chance to position this nation to leapfrog
international competition creating, in fact, an export market
for our innovation in the form of products and services. The
BITS Act will help make this possible in several ways.
First, it generally protects nascent broadband services of
all kinds, voice, video, data, from regulation at the Federal,
State and local level. Second, the bill extends these
protections to specific services such as VoIP and broadband
video services in a socially conscious manner. The legislation
preserves important public policies such as protecting
consumers privacy, guaranteeing E911 access, and maintaining
video programming safeguards.
The bill creates a streamlined Federal video franchise
process for broadband video services that will ensure--that can
be a key driver of continued broadband deployment immediately.
The BITS Act achieves this goal while protecting the ability of
municipalities to manage their local rights-of-way as well as
the video franchise revenue streams they have come to rely on.
The new broadband networks Alcatel is building are unique
in the U.S. market. These networks will enable two-way video
services that allow for unprecedented subscriber interactivity,
including robust parental controls for kid-friendly services,
increased ethnic content, and other personalized applications
not possible over existing video services.
Those who ask whether broadband video services as defined
in this legislation being deployed by companies like SBC and
others are truly distinct from cable TV, I ask you to recognize
the answer is yes. MSO's are preparing to invest billions of
dollars into their own networks in an effort to compete. If
telecommunications carriers were simply rolling out cable TV,
there would be no need for such an investment by the cable
operators. It is this very type of facilities-based broadband
competition that benefits consumers in both quality of service
and in pricing.
The BITS Act also includes important Internet neutrality
principles. Alcatel fully supports their inclusion into this
legislation as an important component of broadband consumer
demand.
Finally, I would like to take a moment to commend the
bill's authors for being sure to protect the rights of
municipalities to enter the broadband market when they
determine such action is in the best interest of their local
communities. As Congressman Boucher knows, Alcatel was the main
vendor to municipal fiber to the home building Bristol,
Virginia, and we continue to work with municipalities in an
effort to help them achieve their broadband potential where
needed.
Mr. Chairman, Ranking Member Markey, members of the
subcommittee, thank you for the opportunity to appear here
today. I look forward to discussing the issues and answering
any questions later.
[The prepared statement of Tim Krause follows:]
Prepared Statement of Tim Krause, Chief Marketing Officer and Senior
Vice President for Government Relations, Alcatel North America
Chairman Upton, Ranking Member Markey, Members of the Subcommittee.
Good morning. My name is Tim Krause, and I am the Chief Marketing
Officer and Senior Vice President for Government Relations of Alcatel
North America.
Thank you for the opportunity to appear before you today regarding
the Broadband Internet Transmission Services Act. Alcatel endorses this
legislation, and requests the committee move it forward in the
legislative process without delay. Alcatel is also a member of the
Telecommunications Industry Association, and Alcatel believes the bill
is consistent with TIA's convergence and broadband deployment policies.
The BITS Act will ensure the continued growth of the U.S. broadband
market by creating legal and regulatory certainty for the services that
flow over powerful new broadband networks. The result will be the
continued introduction of Internet-based substitutes for traditional
communications services by facilities-based and Internet-based
providers alike, including converged triple-play offerings of voice,
video, and data across traditionally distinct communications platforms.
Alcatel is a global company with operations in 130 countries, 2004
revenues of 12.3 billion Euros; and worldwide employees totaling
56,000. Alcatel has made over $17 billion in technology investments in
North America. We have 8,800 employees in North America, and dedicate
more than 20% of our North American revenue to research and development
that we conduct in North America--a higher percentage than we reinvest
worldwide. Our global R&D centers for IP routing and enterprise
applications are based in California, and our global R&D center for
fiber to the home technologies is based in North Carolina. Alcatel's
customers include traditional phone companies, mobile carriers, private
and public enterprises, transportation networks, and satellite
operators.
The North American market is vital to Alcatel and the entire
technology industry, because it is here that consumers are the most
demanding, and as a result, this market leads the world in innovation.
The legal and regulatory clarity that the BITS Act will provide will
strengthen those qualities in the North American market, and better
enable the manufacturing industry to compete in the face of the
commoditization of products from low cost countries, and export new
broadband innovations developed here at home abroad.
Alcatel is the worldwide and North American leader in broadband
access technologies, with over 70 million digital subscriber lines
shipped to service providers. Alcatel has also been selected by SBC as
its primary network infrastructure and services supplier for Project
Lightspeed, which will deliver integrated IP Television and other
ultra-high-speed broadband services to 18 million households by mid
2008. Alcatel will enable SBC to provide this suite of services by
building fiber deeper into the SBC network--using shorter copper
subloops in existing neighborhoods and building fiber all the way to
the premises in new housing developments. Equally as important, Alcatel
will enable SBC to deliver multiple services with high quality over a
single pipe to each home by leveraging the IP technologies it has
developed.
The new broadband network Alcatel is building for SBC is not mere
conjecture, but a reality. Alcatel is already deploying such networks
in countries across the globe, and that is why the BITS Act is critical
for the future of communications in our nation. We have all read the
statistics--the U.S. is not the world leader in broadband deployment,
either in terms of penetration or bandwidth. Other nations have adopted
policies that make broadband deployment a national commitment, while
here at home the broadband market has been mired in almost a decade of
legal and regulatory arbitrage that has held us back from reaching our
full potential. By building on the gains of the Triennial Review and
creating a legal framework for the continued emergence of IP-enabled
services going forward, we can position our nation to leapfrog the
international competition.
The BITS Act will help make this possible in several ways:
First and foremost, it establishes that broadband services of all
kinds--voice, video, and data--are interstate in nature and not subject
to onerous new regulations at the Federal, State, and Local level
outside the confines of the bill itself. This is critical for
establishing the certainty needed by facilities-based broadband service
providers as well as Internet-based broadband service providers to take
the financial risks of innovation in new services.
Second, the bill extends those protections to specific broadband
services that are replacing traditional services, such as VoIP and
Broadband Video Services, but in a socially responsible manner that
preserves long standing policies, such as protecting consumer privacy,
ensuring consumers have access to dependable E911 service, as well as
video programming safeguards.
Most critically from Alcatel's perspective, the bill creates a
streamlined Federal video franchise process for broadband video
services. By protecting the ability of municipalities to manage their
local rights of way, as well as the revenue streams they have come to
rely on from video service providers, yet ensuring broadband video
services can be deployed without delay, the BITS Act ensures that
broadband video services can be a key driver of continued broadband
deployment unlike anything we have seen in the U.S. to date.
The new broadband network Alcatel is building for SBC is truly
unique to the U.S. market, and in terms of its broadband video service
capabilities it is most definitely not cable TV. SBC's broadband video
service will be a two-way, interactive service that allows for
unprecedented subscriber interaction with the service through the
network. This interactivity enables features such as subscriber-
programmed channels, with content such as home movies or photo albums,
for instance, that can be made available to other subscribers.
Subscribers watching sports programming will have access to numerous
camera angles, data integrated from the Internet, and an unprecedented
HD experience.
The benefits of the two-way interactive network Alcatel is building
for SBC hardly stop there. Parents will have unprecedented capabilities
to monitor and control the content to which their children have access
in a user-friendly environment. Subscribers of all backgrounds can have
access to content that suits their tastes and interests, whether that
is Spanish language programming and content, or other ethno-centric
programming and services. Additionally, the powerful two-way,
interactive network can deliver on the long-standing promise of
telemedicine by making interactive healthcare a reality, and be equally
as effective in the classroom.
Utilizing IP technology to offer a broadband video service ensures
that capacity for each subscriber is maximized, utilizing only that
capacity needed to deliver the specific programming being viewed by a
subscriber. This eliminates capacity challenges familiar with cable
television services. In practical terms, once constructed, SBC could
use its new broadband network to offer to its subscribers every single
broadcast channel, if it chooses, in analog and digital, including all
multicast digital channels. There is no lost opportunity cost for SBC
in doing so, because it has essentially unlimited capacity to offer
video programming over its new network.
To those who openly question whether broadband video services as
defined in this legislation are truly distinct from cable TV, I urge
you to recognize the answer is an emphatic ``yes!''
One need only look at what the cable industry is doing in response
to the investments being made by companies like SBC and Verizon. Our
review of current MSO strategies indicates they are preparing to invest
billions of dollars into their own networks in an effort to compete
with the powerful broadband networks SBC and Verizon are deploying. If
SBC and Verizon were simply rolling out cable TV, there would be no
need for such investments by cable operators. It is this very type of
facilities-based broadband competition that benefits consumers in both
quality of service and in pricing.
The BITS Act also includes important Internet Neutrality
principles, which prohibit any service provider from denying
subscribers access to lawful content available on the Internet, or from
connecting devices to their broadband connections. The concept of
Internet Neutrality, or ``connectivity principles,'' has long been
advocated by the high tech community, and Alcatel fully supports their
inclusion into this legislation. As a result, consumers accessing these
new high-powered broadband networks will continue to be free to access
the Internet-based content of their choosing. As broadband connections
to the public Internet continue to increase in bandwidth, consumers
will be increasingly empowered to watch video from alternative sources
over the Internet if they so choose, or access any other Internet-based
substitute for facilities-based broadband services they so desire.
Finally, I would like to take a moment to commend the bill's
authors for being sure to protect the rights of municipalities to enter
the broadband market when they determine such action is in the best
interest of their local communities. As Congressman Boucher knows,
Alcatel was the main vendor to a municipal build in Bristol, Virginia,
and we continue to work with municipalities in an effort to help them
achieve their broadband potential where needed.
Mr. Chairman, Ranking Member Markey, Members of the Subcommittee,
thank you again for the opportunity to appear before you today. I look
forward to discussing these issues and answering any questions you may
have.
Mr. Upton. Thank you. Mr. Mitchell?
STATEMENT OF PAUL MITCHELL
Mr. Mitchell. Chairman Upton, and Ranking Member Markey,
and members of the subcommittee, I am very pleased today to
testify on this far-reaching legislation. When I testified
before the subcommittee earlier this year, I focused on how
Internet technologies are transforming the consumer experience,
especially in the area of broadband platforms delivering video
and other advanced services.
This hearing is important because it takes us from the big
picture to the critically important details. How will the
legislation encourage all players in the Internet world,
network operators and content providers alike, to deliver
advanced Internet content and services to consumers. In this
area, I have two overarching observations.
First, we are concerned that the definitions in the
discussion draft could extend regulation to Internet services
that have never before been regulated. And second, although the
draft includes a section on net neutrality or connectivity
principles, and we commend you for that, we are concerned that
it does not give adequate assurance to consumers and to
Internet content and service providers, that the marketplace,
instead of Internet broadband access providers, will decide
what content and services succeed or fail on the Internet.
This concept of connectivity principles or net neutrality
is not new, and it is the concept that helped fuel the
Internet's growth to the benefit of network operators, content
providers and the public. It is not broken and doesn't need to
be fixed, but it needs to be maintained in the broadband era.
As you now, Microsoft provides a wide array of current and
next-generation Internet offerings, including MSN for news and
entertainment, Hotmail for free email, and our Live Meeting
service which enables businesses to communicate more
effectively, and for gamers we have Xbox Live connecting gamers
around the world when they play Xbox games.
My group develops the technologies for the delivery of
video content. Microsoft TV Foundation Edition is currently
being deployed by Comcast in Washington State, and we also
developed the IP-based TV platform products that SBC will soon
deploy as part of Project Lightspeed, and that Verizon recently
launched in Keller, Texas.
Network operators are investing in infrastructure for the
broadband future, but Microsoft and other Internet companies,
like Amazon.com, eBay, Google, Interactive Corp., and Yahoo,
are also investing billions to bring content and services to
the public, and telecommunications carriers will be paid some
of that money, too. These investments by companies on the ends
of the network matter because consumers do not buy technology
advances; they buy content and services. Congress should
therefore adopt policies that encourage Internet content
providers and service providers to bring new and evolving
offerings to the public.
In my earlier testimony, I set out goals that should guide
any legislation to promote broadband Internet access and
content, and they are as follows: the Internet services and
products should remain largely unregulated; consumers should be
able to access any Internet site and use lawful application,
devices or content with broadband connections; and where they
are subject to regulation, Internet and video services should
be subject to exclusively--to Federal regulation.
So looking at the staff draft, how does it stack up against
these goals? First we recognize that what you are trying to do
is incredibly difficult. We appreciate the complexity of these
issues. But now, since many seem to agree that Internet
services should remain largely unregulated, we believe that the
definitions in the discussion draft reach broader than
necessary. Services and products that ride the top broadband
transport networks have never been subject to regulation
before. In the definition of BITS, however, the discussion
draft could be interpreted to extend regulations to Internet
services such as MSN, Hotmail or Yahoo. These services have not
been subject to regulation because they do not provide
transport connection to consumers. We suggest the subcommittee
revise the BITS definition to apply only to entities that
provide or resell facilities for accessing content and services
on the Internet.
We are also concerned that the definition of VoIP is
broader than necessary. Click-to-call features which enable an
outgoing call with a mouse click on a web page could be covered
by the definition even though they are not substitutes for
phone service, and they are really only one-way services.
Likewise, Xbox Live could be covered by the definition even
though it is not a substitute for telephone service either. We
see no reason, and we think consumers see no reason, why Xbox
Live or Live Meeting--which is a product to enable virtual
office meetings--should have to offer E911 capabilities or
shoulder other telephone-like burdens since they only provide
voice services in a contained environment. Instead, we suggest
that the VoIP definition should cover only those services that
are genuine substitutes for traditional phone service, such as
those using phone numbers and offering interconnected services
for sending and receiving calls to and from the public switch
telephone network.
Finally, the concept of net neutrality or connectivity
principles should remain a core value in the broadband Internet
world. The consumers' ability to access any lawful content over
dialup connections motivated Internet companies to invest,
innovate, and compete in the Internet marketplace to the
benefit of everyone. These principles give consumers, not
network operators, the power to determine which services and
products will succeed or fail. These enabling freedoms need to
be maintained.
We suggest two important improvements to the draft in this
area. First, to ``preserved authorities'' language is ambiguous
or overly broad and needs tightening in order to give the
market adequate assurance. And, second, we believe the section
on connectivity principles should apply to entities that
provide or resell facilities for the transport of information
and that provide a subscriber with Internet access or content
derived from the Internet. The current definitions and
provisions suggest that a company can both provide content from
the Internet and not adhere to the connectivity principles. A
company, of course, can choose to not include Internet content,
in which case we think the connectivity principles should not
apply.
Thank you for the opportunity to appear again. You are
undertaking important reforms, and I appreciate the opportunity
to work with you on this legislation. I am happy to take your
questions.
[The prepared statement of Paul Mitchell follows:]
Prepared Statement of Paul Mitchell, Senior Director and Chief of
Staff, Microsoft TV Division, Microsoft Corporation
Chairman Upton, Ranking Member Markey, and Members of the
Subcommittee: My name is Paul Mitchell, and I am Senior Director and
General Manager for the Microsoft TV Division at Microsoft Corporation.
When I testified before the Subcommittee earlier this year, my
statement focused on how current Internet technologies are transforming
the consumer experience, especially in the area of broadband platforms
being used to deliver video and other advanced services using IPTV
technology. I explained how IP services and products today enable the
delivery of voice, data, and video in new and innovative ways and
represent a remarkable change in the history of how consumers
communicate and access video and data information.
Today's hearing moves us from the big picture to the critically
important details: how proposed legislation would promote or impede
broadband deployment and the continued growth of Internet content and
services in America. In short, how can legislative levers be used to
promote continued investment in Internet content and services and
enhance consumer benefit from these tremendous IP services and
products.
I will elaborate further but I have two overarching observations:
First, the definitions in the bill could extend regulation to Internet
services that have never been regulated before. Lest this Congress run
the risk of impeding innovation by regulating new services, we suggest
that the definitions need to be revisited. Second, the policy of ``net
neutrality''--or the Connectivity Principles as Microsoft prefers to
call them--has served consumers, content providers, and network
operators exceedingly well over the past decade. These principles
provide the certainty necessary for Internet companies to invest
billions of dollars in new and innovative services and products which
have added value to the underlying network. It also leaves it to the
consumer in the marketplace to determine what services and products
will succeed or fail. This policy is one of the fundamental reasons why
the Internet has become what it is today. It does not need to be fixed.
It only needs to be maintained in the broadband world.
role of microsoft in ip-enabled services.
Microsoft, as a technology provider, plays an important role for
network providers and consumers alike as IP-based technologies and
features are made available via a great diversity of devices, including
PCs, TVs, mobile phones, and handheld devices. In our world, Internet
or IP services and products generally mean those services and products
that ride atop of or are connected to broadband transport networks. To
name just a few examples, our MSN division delivers to computers,
wireless phones, and handheld devices a variety of content, including
news and entertainment, as well as other services such as downloadable
music and video clips. In addition, consumers can sign up for Hotmail,
a free email service, and MSN Messenger, a free instant messaging
product. Our Live Meeting service enables a group of people in an
enterprise environment or other setting to enjoy new options for real-
time collaboration. Small groups and enormous groups can simultaneously
talk among themselves, and either create or view a Power Point
presentation, while the participants never leave their offices. This
service increases worker productivity, using Microsoft software,
broadband transport connections, and standard telephone connections.
Our Xbox Live Service offers another example of how IP technology can
be used to improve a consumer experience, in this case gaming, by
allowing gamers to compete against each other over the Internet and
enhance their gaming experience by talking to each other via a VoIP
feature.
My group, Microsoft TV, offers technology solutions to
infrastructure and content providers. We developed the Microsoft TV
Foundation Edition, which is currently being deployed by Comcast here
in the U.S. It brings advanced programming-guide functionality, along
with digital video recording (DVR) and a client applications platform
to traditional cable networks. We also developed the IP-based TV
platform products that SBC will soon deploy and that Verizon recently
launched in Keller, Texas. These products enable delivery of a high-
quality interactive video content service to consumers via the new
facilities being deployed by these traditional telephone companies. The
Microsoft TV products can be deployed over a variety of networks
including a broadband cable, DSL, or even wireless networks. They will
offer new interactive features for consumers, and we think consumers
will find they create a very compelling experience.
VoIP--which refers to the delivery of voice over an IP based
platform--is an important development on the Internet. Microsoft plays
a role in advancing this technology, too. VoIP is a technology that can
be used in a variety of ways and presents a definitional challenge for
policy makers. VoIP encompasses a great range of capabilities--from a
feature in a gaming console such as Xbox, to a computer-to-computer
communication, to a full blown VoIP telephone service that is capable
of interconnecting with the PSTN and terminating calls to any telephone
on the planet.
As this Subcommittee considers the appropriate regulatory treatment
for those VoIP services that are offered as a substitute for consumers'
traditional phone services--what you might call a VoIP Telephony
service--it must ensure that other VoIP offerings or capabilities are
not swept inadvertently into the mix. For instance, no one sees the
VoIP feature that can be used with our Xbox Live gaming service as a
substitute for their landline phone. The Xbox Live VoIP feature does
not use telephone numbers, cannot be used in conjunction with a phone,
cannot connect to the PSTN; it can only be used if you have an Xbox
game console, and users are identified solely by their gamer tags and
not their names. In short, the Xbox Live VoIP feature is simply too
limited to be of use to consumers as a substitute for their existing
telephone service. There is no sound policy basis for regulating Xbox
Live like a telephone. No one is going to stop using plain old
telephone service because they've become an Xbox Live gamer.
core principles to guide legislation
The Subcommittee will no doubt hear today about the tremendous
investments made by the network operators to promote broadband, and
they should be commended for that commitment to the future. But the
network operators are not alone in spending billions of dollars to
deliver content and services to broadband Internet consumers. Microsoft
and other Internet companies, such as Amazon.com, eBay, Google,
Interactive Corp., Yahoo! and others, have also made billions of
dollars of investments to make broadband Internet content, services,
and products available to consumers and businesses, and some of that
money is paid directly to telecommunications carriers. In the current
calendar year, Microsoft alone is likely to spend over $7 billion on
research and development--an amount that has gone up by an additional
billion dollars every several years over the course of our recent
history.
This fact is sometimes lost in this debate, but it bears
remembering that consumers and businesses buy content and services made
available by Internet companies, not just technologies. Consequently,
we recommend policies that also encourage Internet content and service
companies, as well as technology companies, to make the necessary
investments for the broadband Internet future.
When I testified earlier this year, I suggested four goals that
should guide any legislative effort to promote broadband use and the
future of the Internet. Let me briefly summarize those four goals:
1. Internet-based services and products should remain largely
unregulated.
Internet-based services, that is, those services and products that
ride atop or connect to the underlying broadband transport services,
should remain largely unregulated and not be subject to the
Communications Act. The success of the Internet as a tool for consumers
and business has been remarkable, and Congress should proceed carefully
so it does not inadvertently disturb this accomplishment. The choice of
content and services available over the Internet is awe inspiring, and
that stands out as a huge accomplishment of this medium. Thus, Congress
should ask whether any proposed law or regulation that touches upon
Internet services and products is necessary for the public good.
2. Consumers should be able to access any Internet site and use any
lawful application or device with a broadband Internet
connection--just as they have been able to do in the narrowband
world.
This principle, which sometimes is referred to as ``net
neutrality'' or ``Connectivity Principles,'' is really about letting
consumers decide, and not network operators, what content and services
succeed or fail on the Internet. Connectivity Principles are important
as a policy matter because they determine whether consumers in the
marketplace drive decisions on innovation and technology, or whether
one lets the network operators steer those decisions. We are pleased
that the network operators are investing in technology and innovation,
and we are proud partners with them in offering content and services to
the public. We just think that other companies should continue to be
able to offer Internet content and services as well.
In August of this year, the FCC adopted a Policy Statement
endorsing the spirit and goals of the Connectivity Principles that
several core Internet companies--Amazon.com, eBay, Google, Interactive
Corp., Microsoft, Yahoo! and others--have long endorsed. Last week, the
FCC voted unanimously to require SBC and Verizon to adhere to them, at
least for two years. These principles have defined the Internet since
it was launched. Specifically, they are:
Freedom to Access Content. Consumers should have access to their
choice of legal content.
Freedom to Use Applications. Consumers should be able to run
applications of their choice.
Freedom to Attach Personal Devices. Consumers should be permitted to
attach any devices they choose to the connection in their
homes.<SUP>1</SUP>
---------------------------------------------------------------------------
\1\ FCC Policy Statement (Aug. 5, 2005); SBC-AT&T and Verizon-MCI
Merger Approvals (Oct. 31, 2005).
---------------------------------------------------------------------------
These hallmarks of consumer expectations have been, and remain,
fundamental to the success of the Internet. Those basic features
defined consumer and company experiences on the Internet, and we agree
with others in the industry that these principles should be carried
forward to the Internet broadband future.
3. If policy makers act, they should maintain a ``light touch'' and act
only with respect to those services that give rise to present
day policy questions.
In order to avoid constraining the continued growth of IP services,
any regulation imposed on IP services should be done with a light touch
and only where there is a policy issue that needs to be addressed. For
example VOIP is a technology that can be used in a variety of ways. To
the extent policy makers are seeking to address a policy objective,
they should not focus on all VOIP technologies. Instead they should
focus only on those that present a policy question. If policy makers
seek to preserve E911, we would suggest that they need not look at
implementing E911 in the Xbox Live Service but instead may want to
explore those VOIP services that are substitutes for existing telephone
service. The principle to maintain is that, to the extent regulation is
needed, policy makers should act with the lightest touch necessary to
solve their policy objective in order to provide as much latitude for
the continued innovation and growth of Internet services as possible.
4. Where subject to regulation, Internet and video services should be
subject exclusively to Federal jurisdiction.
Congress should protect IP services and all video and broadband
companies from conflicting and overlapping State and local regulation.
These services are used as an integral part of interstate commerce,
they utilize interstate or global networks, and they generally require
the transmission of data and information across state lines. As a
consequence, where subject to regulation, they should be exclusively
within Federal jurisdiction. The FCC has correctly decided that VoIP is
an interstate service, and that conclusion should apply to other IP-
based services that are subjected to regulatory treatment, as well as
to multichannel video programming services more generally.
the staff discussion draft
To focus our comments on the 70-page draft bill, I will address how
the Discussion Draft responds to each of the four goals we see for any
legislation. For purposes of today's testimony, I will comment on the
weightiest issues. However, I am hoping my Microsoft colleagues will
have the opportunity for broader conversations with the staff about
narrower changes to the draft.
1. Internet services and products should remain largely unregulated.
The keystone of the draft legislation is found in the definitions,
and we are concerned that in some places they sweep broader than
necessary. Under current law, services and products that ride atop of
or are connected to broadband transport networks have not been subject
to regulation, while the underlying transport layer has been regulated
for access, interconnection, intercarrier compensation, and other
purposes. The Discussion Draft, specifically the definition of BITS,
could be interpreted to extend regulations to Internet services, such
as MSN, Hotmail, Google Mail, E*Trade, or Yahoo!. These services have
never been subject to regulation because they do not involve transport
of information and are simply destinations on, or information services
made available via, the Internet. In addition, we would suggest that
these services do not pose public policy questions such as those that
might be posed by a BITs service. As a result, we think they should
continue to be unregulated. We urge the Subcommittee to maintain its
focus on those entities that provide facilities directly to subscribers
that enable the subscriber to transport information to or from the
Internet. This formulation would enable important societal regulatory
objectives to be met while not extending regulation to new areas of the
Internet.
The definition of VoIP also sweeps more broadly than necessary.
Some companies that provide online customer service are beginning to
make use of so-called ``click-to-call'' capabilities. For example, you
can talk to an operator at LensExpress (a contact lens fulfillment
company) via the company's 800 telephone service or via a one-way VoIP
based call from your PC to the company's phone bank. If the call is
completed via the PSTN, the Discussion Draft would treat that
capability as a regulated offering, subject to 911 requirements, USF
fees, consumer protection rules, and the like. Yet, that feature is not
a substitute for traditional phone service--it is only one-way. It is
not the intent of LensExpress to be considered the provider of a phone
service. The company only wants to simplify its customer service--and
yet that capability arguably would lead to LensExpress being covered by
the bill. Over the longer term, because the bill gives the FCC
discretion to expand the definition of VoIP service, the bill's
provisions could be extended to the Xbox Live voice feature simply
because Xbox Live uses an alternative ``identification method'' to
create the voice connection between two Xbox gamers. In the area of
VoIP, we urge the legislation apply only to those services that are a
substitute for traditional voice service; that have a North American
Numbering Plan number; that are interconnected with the PSTN; and that
enable a user to send and receive calls to and from the public switched
network. The 911 provision of the bill refers to these services as
``send-and-receive'' services (at Section 204). We recommend that this
concept be used to define the class of VoIP services subject to any
regulation, lest Congress stymie the development of VoIP capabilities
while those capabilities are still emerging.
2. Consumers should be able to access any Internet site and use any
lawful application or device with a broadband Internet
connection--just as they have been able to do in the narrowband
world.
Section 104 of the Discussion Draft addresses the Connectivity
Principles. As I stated above, the concept that consumers can access
the content and services they want on the Internet without interference
or permission from the network operator is not new. That concept of
Connectivity Principles is even older than the Internet itself. In
fact, you can argue that without these principles, the Internet would
not have evolved as it has. If you consider the Internet a remarkable
engine of innovation and growth, then you should credit in part
Connectivity Principles for that result. We think that policy--letting
consumers decide--has served consumers, content providers, and network
operators exceedingly well over the past decade. That policy is not
broken. It does not need to be fixed. It only needs to be maintained in
the broadband Internet world.
We have joined in the past with other leading Internet companies,
including Amazon.com, eBay, Google, Interactive Corp., and Yahoo!, to
advocate for the continuation of Connectivity Principles, and we are
pleased that the issue has been considered in the Discussion Draft.
Two comments: First, the policy embodied in Section 104 on
Connectivity Principles is an important one and we commend you for
including this concept in the Discussion Draft. However, the provisions
in Section 104 need improvement in specific areas. The ``preserved
authorities'' language is uncomfortably ambiguous in some parts and
overly broad in others.
Second, and this is the critical issue: What entities need to
adhere to Section 104? The version of the Discussion Draft that we have
reviewed states that only those persons which provide BITS need to
follow the net neutrality requirements. Those entities that provide
``Broadband Video Service,'' which includes ``information derived from
the Internet,'' do not have to comply with the net neutrality
requirements.
Our view is that if a BVS provider does include Internet content or
access, then of course the Section 104 Internet freedoms should apply.
Alternatively, if they do not include Internet content or information
derived from the Internet, then the Internet freedoms should not apply.
We have heard that part of the reason for excluding BVS providers
from Section 104 stems from a concern for spam or viruses. Let me start
by saying that we respectfully disagree with that claim as a technical
matter. But more importantly, Section 104 contains clear language that
enables a network operator to manage a network to ensure network
security and reliability. Network management is an important function,
but within the terms of Section 104, the network operators have the
authority they need to guard against these possible problems. That is
not an argument for exempting BVS providers that include Internet
content from Section 104.
In short, those entities that provide subscribers with Internet
content or information derived from the Internet should adhere to the
core principles of net neutrality found in Section 104, and those
principles should be clarified to provide consumers and content
providers with clear and unambiguous protections.
3. If policy makers act, they should maintain a ``light touch'' and act
only with respect to those services that give rise to present
day policy questions.
As I explained above, we are concerned that the definitions of BITS
and VOIP in the bill would extend regulation to Internet services that
have never been regulated and that should remain unregulated because
they ride atop the connection layer or they are not a substitute for
traditional phone service. To illustrate: we do not see any reason why
Xbox Live, a feature that enables persons playing a game to talk (well,
``trash talk'' to use the technical term), should have to offer E911
service. Similarly, we do not see why a collaborative work program,
that enables users to review a document together and have a conference
call to discuss it, should have E911 obligations. Or why Hotmail or MSN
should have to register with all 50 states in order to continue to
provide service. The changes to the definitions we recommend above
would keep the focus on the activity that should be covered to achieve
important societal objectives without going too far.
I also want to address briefly the important issue of universal
service funding. We recognize that the Discussion Draft refers this
issue to the Commission, but we believe that the Commission should use
a ``connections'' approach and not a numbers and other identifiers
approach, nor the current system, in order to finance the USF system. A
connections approach reduces arbitrage and captures all those persons
who use the telecommunications infrastructure, and that is who should
be contributing to its support.
4. Where subject to regulation, Internet and other video services
should be subject exclusively to Federal jurisdiction.
We think that the current regime of having local and state
governments license and regulate video distribution networks needs
reform. The current system does not work for telephone companies trying
to enter the business, and it does not work for cable companies already
in the business. Both networks should not be subject to local and state
regulation but should be covered by a federal regime. The same should
apply to all Internet services. These are inherently interstate
services that where regulated should be committed to the federal
government for exclusive regulation. The Discussion Draft takes some
steps in that direction, though it could be improved to ensure that
cable companies today get out from under the burden of state and local
regulation.
Thank you for the opportunity to provide my views on this
critically important legislative proposal. I look forward to your
questions and to working with you and your staff going forward on these
and other aspects of the draft.
Mr. Upton. Thank you. Ms. Praisner?
STATEMENT OF MARILYN PRAISNER
Ms. Praisner. Thank you.
Mr. Upton. Oh.
Ms. Praisner. Good morning, Chairman Upton, Mr. Markey,
Chairman Barton, Mr. Dingell, and members of the committee. I
especially want to thank my Congressman, Congressman Wynn, for
his kind introduction and comments. I look forward to working--
continuing to work with you for our common constituents.
For 3 decades, local governments have used cable
franchising authority to achieve nearly universal deployment of
broadband advance services, and to protect consumers within our
authority. Let there be no mistake, local governments want
competition as fast and as much as the market can sustain.
While we do not believe that the local franchise process has
impeded video competition, we have been prepared to explore
different means of streamlining the process. However, we remain
skeptical.
Most recently in Texas, Telco's were given what they
wanted, fast-track franchising, but Verizon and SBC have to-
date offered to provide competitive choice to less than 1
percent of Texas households. Is the Nation giving up current
consumer protections and community benefits just to provide
choice to a small percentage of the population? We continue to
be concerned, as I know you are, about the digital divide.
Local governments have come to the table in search of a
legislative compromise. We remain clear about our broad
parameters: preserve universal service, E911 local emergency
alerts, and the Nation's homeland security; protect our
property rights and our authority for managing the Nation's
rights-of-way. Private, for profit and quasi-permanent
occupancy are the most valuable real estate held by local
government must be fairly compensated, both through social
obligations to the community served and in rental fees.
Preserve local governments' right to provide broadband
transport and communications services for itself and our
constituents. Insure that a local Telco franchise is comparable
in terms and conditions to a cable franchise. And provide for a
consumer's choice of broadband providers with guaranteed
network neutrality.
Local government organization staffs met with your
collective counsel to craft a solution. The fruits of those
labors was the first staff draft, or BITS I. While not perfect,
BITS I was a good start. It reflected a non-partisan dialog
with all the parties at the table. It evidenced a respect for
and agreement with many of the essential items I cited. We were
invited to assist in strengthening those areas where local
government believed the staff draft had missed the mark.
The revised staff draft, BITS II, on the other hand, breaks
faith with those deal points. The telephone companies, to us,
appear to get everything they asked for including fast-track
franchising while avoiding most social obligations. Public
safety standards are determined by the industry without proper
oversight. Local government is permitted only to enforce what
the industry deems important. This is an inappropriate Federal
and private industry intrusion into the management of our
streets and sidewalks. State and local government is not kept
whole.
BITS II limits rights-of-way fees to the recovery of
management costs. Broadband video franchise fees are limited to
5 percent of subscriber revenue, not all video service-related
revenues. So Telco's not only get out from under franchising,
they get subsidized use of local governments' property. As a
comparison, the Federal Government charges the full market
price to use public spectrum.
Community needs and interests are essentially abandoned.
While cable must continue to provide local community needs and
interests such as PEG I-Nets, and emergency alerts, the Telcos
do not. Consumers lose choice and competition and there is no
network neutrality. BITS would not even replicate the rental
fees contained in the recent Texas franchising legislation.
Needless to say, local government officials across the country
are not pleased with the prospect of this bill moving forward
as is.
We welcome your introductory comments about the fact that
this is a draft. We solicit the support of the bipartisan
leadership and every member of this subcommittee for our
efforts to protect your and our constituents. This bill, as it
is currently worded, breaks faith with the promises we were
made in exchange for our support for the national franchise
solutions. We were promised consumer choice, fair competition,
preservation of our rights-of-way authority, and keeping local
governments whole. Without appropriate amendments, BITS II, as
I said, breaks faith with those commitments and breaks faith
with our consumers.
We stand ready, Mr. Chairman and members of the committee,
to continue to negotiate on appropriate legislation prior to
markup. We will come back to the table this afternoon. We will
stay and work with you through the Christmas recess if
necessary to achieve the result that we all want: quality
universal service for everyone, all consumers within our
jurisdictions. Thank you very much.
[The prepared statement of Hon. Marilyn Praisner follows:]
Prepared Statement of Hon. Marilyn Praisner on Behalf of National
Association of Telecommunications Officers and Advisors, National
League of Cities, United States Conference of Mayors, National
Association of Counties, and TeleCommUnity
i. introduction
Good Morning, Chairman Upton, Mr. Markey and Members of the
Subcommittee, my name is Marilyn Praisner. I am a member of the County
Council of Montgomery County, Maryland. I appear on behalf of the
National Association of Telecommunications Officers and Advisors
(``NATOA''), the National League of Cities (``NLC''), the United States
Conference of Mayors (``USCM''), the National Association of Counties
(``NACo'') and TeleCommunity.<SUP>1</SUP>
---------------------------------------------------------------------------
\1\ NLC, USCM and NACO collectively represent the interests of
almost every municipal or county government in the U.S.. NATOA's
members include telecommunications and cable officers who are on the
front lines of communications policy development in hundreds of cities
nationwide. TeleCommUnity is an alliance of local governments and their
associations which are attempting to refocus attention in Washington on
the principles of federalism and comity for local government interests
in telecommunications. Councilmember Praisner is chairman of the
Telecommunications and Technology Steering Committee for the National
Association of Counties; Chair of the Executive Committee for SAFECOM;
Chair of TeleCommUnity and Former Vice-Chair of Local State Government
Advisory Committee to the FCC.
---------------------------------------------------------------------------
ii. the role of cable franchising
For three decades local governments have used cable franchising
authority to achieve nearly universal deployment of broadband advanced
services and to protect consumers to the extent we have authority. We
also know that only wire line competition reduces cable rates
<SUP>2</SUP> and enhances service.<SUP>3</SUP> Therefore, let there be
no mistake, local governments want competition, as fast and as much as
the market and some state laws will sustain.<SUP>4</SUP>
---------------------------------------------------------------------------
\2\ 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. In separate studies both the
FCC and GAO documented in markets where there is a wire-line based
competitor to cable that cable rates were, on average, 15% lower.
United States General Accounting Office, Telecommunications Issues in
Providing Cable and Satellite Television Service, Report to the
Subcommittee on Antitrust, Competition, and Business and Consumer
Rights, Committee on the Judiciary, U.S. Senate, at 9, GAO-03-130
(2002)(``GAO 2002 Study''), available at www.gao.gov/cgi-bin/
getrpt?GAO-03-130; In re Statistical Report on Average Rates for Basic
Service, Cable Programming Service, and Equipment, Report On Cable
Industry Prices, MM Docket No. 92-266, 17 FCC Rcd 6301, Table 6
(2002)(``2002 Cost Report'').
\3\ For over thirty years local governments have granted incumbent
cable operators and competitive broadband providers non-exclusive
franchises to use public property to provide cable service and non-
cable services. Grants of exclusive franchises, which were rare, were
prohibited by the 1992 Cable Act. 47 U.S.C. 541(a)(1). New entrants
and incumbent cable operators are using new and upgraded systems to
offer bundled combinations of video programming, Internet access, and
telephone service to increase per subscriber revenues.
\4\ 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. It is also
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.
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In an effort to promote competitive cable offerings, in 1992,
Congress amended 47 U.S.C. 541(a)(1) to ban the granting of exclusive
cable franchises and imposed an affirmative obligation on franchising
authorities to ``not unreasonably refuse to award an additional
competitive franchise . . .'' <SUP>5</SUP> There have been very few
cases filed pursuant to Section 621(a) <SUP>6</SUP>, and even fewer of
these claims have found fault with local franchise authority grants or
refusals.<SUP>7</SUP>
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\5\ See Subsec. (a)(1). Pub. L. 102-385, 7(a)(1))
\6\ As of October 26, 2005, an electronic search of the Westlaw
system reveals 13 published opinions which cite Section 541(a)(1). The
13 published opinions represent 11 different controversies. Two of the
controversies have trial court and appellate court opinions. Of the 11
different cases;
Two were brought against the US government acting as a cable
operators on military bases (Americable International, Inc v. Dept of
Navy, 129 F.3d 1271, (D.C. Cir. 1998) (Navy's refusal to grant a SMATV
contract, does not rise to a 541(a)(1) violation.); Cox Cable Comm.,
Inc. v. United States, 992 F.2d 1178 (11th Cir.1993) (11th Circuit
found a violation when Robins Air Force Base granted an exclusive cable
franchise to Centerville Telecable, the winner of a competitive bidding
process.);
Four of the cases saw local government citing to the section as a
justification for their actions. Twice local government has
unsuccessfully cited Section 541(a)(1) as means to defeat exclusive
franchises that pre-dated the Cable Act. (James Cable Partners v. City
of Jamestown, 43 F. 3d 277 (6th Cir. 1995); Service Electric
Cablevision v. City of Hazleton 2005 WL 2020452 (M.D.Pa. 2005). Once it
was used to defend against a claim of favoring a competitor over an
incumbent (Cable TV Fund v. City of Naperville and Ameritech New Media,
Inc., 1997 WL 280692 (N.D. Ill., 1997) and once to demonstrate that the
cable franchising process did afford due process standards. Liberty
Cable v. The City of New York, 893 F.Supp 191 (S.D. New York, 1995)
One case was brought against a private developer.
While there are not a great many common threads in the Section
541(a)(1) cases, there are two absolutes.
A party must ask for a franchise before an LFA can be found to have
unreasonably denied the grant of a second franchise. ``A natural
reading of 541 requires that Houlton Cable apply for a second
franchise before it can ask this Court to review whether it is
reasonable to refuse one.'' NEPSK, Inc. v. Town of Houlton, 167
F.Supp.2d 98, 102 (D.Me 2001) See also NEPSK, Inc. v. Town of Houlton
283 F. 3d 1 (1st Cir., 2002); The requesting party must be asking for a
new franchise and not a renewal. In I-Star Communications Corp. v. City
of East Cleveland, 885 F.Supp. 1035 (N.D.Ohio 1995). the District Court
for the Northern District of Ohio held that I-Star did not state a
claim for relief pursuant to 541(a)(1) because the case concerned the
City's efforts to revoke I-Star's existing franchise, not a denial of
an application for a ``second competitive franchise.''
\7\ In thirteen years, only twice has a local government LFA been
found to violate or potentially violate Section 541(a)(1). In one case
the violation was a matter of semantics and in the other the finding
was procedural. In Qwest v. Boulder 151 F.Supp.2d 1236 (D. Colorado,
2001) Qwest was providing cable programming in Boulder through a
revocable permit granted by the city. In addition to Qwest, TCI was
also providing cable in the city by means of a revocable permit, while
Wild Open West, a third provider, was offering cable in the city by
means of a franchise. Testimony was presented to explain that Qwest and
TCI operated under a revocable permit rather than a franchise as the
city's charter required a vote of populace for the issuance of a
franchise. Wishing to avoid the expense of such an election, Qwest sued
arguing that the election provision was preempted by 541(a)(1) and
the Court agreed. In Classic Communications Inc. v, Rural Telephone Co,
956 F.Supp. 896 (D. Kansas, 1996) Telecommunications company and its
telephone and cable television subsidiaries brought suit for refusal to
grant cable television franchises to cable television subsidiary. The
Kansas District court denied the cities' motion to dismiss stating:
whether the Cities' refusal was unreasonable is not an issue at this
stage of the litigation.
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iii. is the 4th time the charm?
Much like you, local governments have been gravely disappointed
with the telephone industry's past promises-made versus reality-
delivered. Three times before, in 1984, 1992, 1996, the telephone
industry promised Congress it would enter the video services business.
Each time Congress amended the laws to permit the entry. Now they ask
again.
While local government will never agree that the local franchise
process has impeded video competition, we are prepared to explore
different means of streamlining the process.<SUP>8</SUP> We are,
however, skeptical.
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\8\ Franchising is not 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.
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.
Local Franchising is Comparatively Efficient, and Must Be Fair to
Protect All Competitors--Franchising is not intended to be complex or
time-consuming, but fair to incumbent, competitor and consumers. In
some communities, operators bring proposed agreements 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.
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.
---------------------------------------------------------------------------
Most recently in Texas, telcos were given what they wanted, fast
track franchises. But Verizon and SBC, months after the law was put on
the books, have offered to provide competitive choice to less than one
percent of Texas households. Is the nation giving up the consumer
protections and community benefits in the current franchising system
just to provide choice to one percent of the population?
iv. the solution on the table
Local government came to the table in search of a legislative
compromise and we remain clear about our broad parameters:
1. Universal service, E-911, local emergency alerts and the nation's
homeland security in an IP era must be preserved.
2. State and local governments' property rights and our authority for
managing the nation's rights-of-way must be kept whole.
Private, for-profit, and quasi-permanent occupancy of the most
valuable real estate held by government must be fairly
compensated--both through social obligations to the community
served and in rental fees.
3. Local governments must have the right to provide broadband transport
and communications services to themselves and to their
constituents to further important community interests.
4. The local telephone company franchise should be comparable to the
terms and conditions applied to their cable competitors.
5. Consumers need choice of broadband providers with guaranteed network
neutrality. The owner of the broadband pipe should never
discriminate among service providers nor limit the consumer's
access to those services.
iv. bits i
The national local government organizations directed our staffs to
meet with your collective counsel to craft a solution. The fruit of
those labors was the first staff draft, or ``BITS I.''
BITS I, while not perfect, was a good start.<SUP>9</SUP> It
reflected a non-partisan dialogue with all the impacted parties
(federal, state, and local governments, industry and consumers) at the
table. It evidenced a respect for and agreement with many of the
essential elements outlined on the above issues. And, we were invited
to assist in strengthening those areas where local government believed
the staff had missed the mark.
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\9\ A copy of the memo local government shared with the bi-partisan
staff is attached hereto as Appendix A. The memo reflects that there
was much to embrace in BITS I and most of local government's comments
sought to perfect the bill, not kill the legislation.
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v. bits ii
The revised staff draft, BITS II, on the other hand, breaks faith
with those deal points. Though it provides for local government
provisioning of broadband transport and services and makes an effort to
preserve narrow-band universal service, E911 and homeland security in
the IP era; the draft is seriously flawed. In this draft the telephone
companies get everything they have asked for including fast track
franchising, while avoiding most social obligations ``and everyone else
loses.
1. Public safety standards are determined by the industry without
proper oversight. Local government is permitted only to enforce
what the industry deems important. This is a ridiculous
intrusion by the federal government and the private industry
into the management of local streets and sidewalks.
2. State and local government is not kept whole. BITS II limits rights-
of-ways fees to the recovery of management costs. And Broadband
Video franchise fees are limited to 5% of subscriber revenue,
not 5% of all video service related revenues which is standard
today. In other words, Telcos not only get out from under
franchising, they get subsidized use of local government's
property. As a comparison, the federal government charges a
full market price to use public spectrum. Again, by these
provisions, Congress clearly expresses favoritism towards one
segment of the industry by granting subsidized rights to access
public property, and local government revenues are severely
curtailed in the process.
3. Community needs and interests are essentially abandoned. While cable
must continue to support local community needs and interests
such as PEG I-Nets and emergency alerts, the telcos do not.
This results in governmental discrimination favoring one class
of video provider and a reduction in community benefits.
4. Consumers lose choice and competition. Broadband competitors can
buyout their competition. There is no network neutrality.
Collectively, these changes break faith with the promises of the
Committee leadership and the promises of the industry. BITS II would
not even replicate the rental fees contained in the recent Texas
franchising legislation. We can only assume that Texas members want to
preserve the compromise the industry agreed to not less than two months
ago in Austin.
vii. historical and current role of social obligations
Finally, 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.
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.
viii. conclusion
Local government officials across the country are going to be very
unhappy if this bill moves forward. We solicit the support of the bi-
partisan leadership and every member of this Subcommittee for our
efforts to protect your and our constituents. We also appeal to your
sense of fair play. This bill breaks faith with the promises we were
made in exchange for our support of a solution. We were promised
consumer choice, fair competition and preservation of our rights-of-way
authority, and that local governments would be kept whole. BITS II
reneges on all three promises. Any Member who supports BITS II without
amendment will break faith with local government and consumers.
Local government is ready to continue to negotiations on
appropriate legislation prior to markup. We will come back to the table
this afternoon and work through the Christmas break, if necessary, to
achieve such a result.
Thank you. I look forward to answering any questions you may have
Appendix A
Local Government Initial Comments to the House Staff Draft of 9-15-05
Local Governments support the following:
Local government determines public access channel (PEG) obligations
and bonding requirements and Video provider must satisfy local
authority before offering service.
All new technology providers must pay franchise fees.
Subjecting the new class of ``Broadband Video Service'' and services
integrated with it to a franchise fee.
The definition of gross revenue is an acceptable compromise.
The draft takes a sound approach to right of way damage or facilities
abandonment, but some management changes are needed.
Municipal broadband provision is sound, provided no cross
subsidization language is added.
Concepts of network neutrality/open access.
Local Governments have the following concerns:
The FCC is the wrong place for right-of-way and franchise fee dispute
resolution. The FCC lacks capacity and expertise. The present
court enforced mechanism works and is appropriate.
To remain whole and to protect public safety networks, local
governments require compensation for current in-kind services
received via franchising in addition to the current franchise
fee.
Local government must be able to protect its citizens' interests and
its rights under local, state, and federal law through
effective enforcement provisions. For example, local government
must be able to conduct audits and collect documents
appropriate documentation to monitor operator compliance.
The draft should include clearer and broader savings clauses,
including clauses that more precisely protect local authority
with respect to: taxes, zoning with respect to cell towers,
damages immunity for actions related to PEG/right of way, and
state and local consumer protection laws.
While local government understands the concern, and is willing to
help develop streamlined procedures for franchising, local
government has strong reservations about any mechanism whereby
the federal government grants access to locally owned property.
Public access (PEG) capacity and use must evolve and advance with
advances in commercial services and technology. Providers must
be obligated to interconnect to receive PEG programming.
While generally a strong proposal, a few adjustments are necessary to
protect local government's ability manage the right-of-way such
as allocation of relocation and management costs. Companies may
not create their own safeguards to protect the public health,
safety, and welfare.
Local government believes that competition is important for all
users. Congress should mandate non-discrimination based upon
income, race, ethnicity, etc. Local elected leaders are in the
best position to make decisions about build out obligations.
Mr. Upton. Thank you. Mr. Putala?
STATEMENT OF CHRISTOPHER PUTALA
Mr. Putala. Thank you. Thank you, Mr. Chairman Upton,
Chairman Barton----
Mr. Upton. Can you--you got to hit that button.
Mr. Putala. Is that better?
Mr. Upton. That is better.
Mr. Putala. Thank you, Chairman Upton, Chairman Barton,
Ranking Member Markey, members of the subcommittee. EarthLink
is the Nation's largest independent Internet service provider,
and we appreciate the opportunity to testify today.
At the outset, let me say that the staff discussion draft
takes, in our view, steps toward an appropriate regulatory
framework for broadband communications. However, the staff--the
draft also takes some half-steps that should be improved, as
well as some missteps that should be reversed.
EarthLink's comments on the discussion draft focus on three
key goals. Goal one, keeping the consumer's ability to choose
his or her service providers foremost in mind, the draft wisely
includes provisions to ensure that broadband transmission
providers do not interfere with the customer's lawful use of
the Internet--the net neutrality provisions. The threat of
Internet discrimination is a real and present danger to
consumers. A recent report from CIBC, a respected investment
bank, goes so far as recommending to Telco and cable companies,
a top-10 list of anti-competitive network discrimination
techniques. Given that threat, we believe the current draft
should be improved.
For example, making it clearer that while different speeds
and different pricing of Internet service can be offered to all
consumers to accomplish network management, but once a consumer
has purchased the right to use the express lane, they should be
able to use that express lane for all applications, not just
those applications their BITS provider would prefer. Network
owners must not be allowed to favor their own customers, their
own applications, once folks are in their express lanes.
Another way to ensure that the consumer is in charge is by
adding a provision for stand alone broadband, known in less-
polite circles as naked DSL. Too many consumers are forced to
buy regular voice phone service when they buy DSL service. Why
should a consumer who wants to use VoIP instead of traditional
phone service have to spend $25 to $50 a month for phone
service he doesn't want in order to get broadband service. The
staff draft should be modified by adding a new provision to
guarantee that consumers have the option of purchasing
standalone broadband without being forced to buy regular phone
service.
I agree with Mr. Ellis about following the wireless
success. Over the past decade, this committee has time and
again gotten it right when facing issues relating to the
wireless industry. 10 years ago, wireless was a duopoly, but
this committee took actions to encourage new facilities,
protect interconnection rights, and give the wireless industry
reasonable time to comply with a host of government mandates.
We were awarded with a vibrant, competitive wireless
marketplace. We are pleased to know that the staff draft takes
an important step to encourage new broadband facilities by
eliminating current and future prohibitions on municipal
broadband initiatives. EarthLink is proud to be leading the
effort to unwire America's cities with WiFi technology,
delivering the Internet wirelessly and affordably.
EarthLink is already partnered with the city of
Philadelphia to build, own and manage, at our cost, a wireless
network to provide broadband to the entire 135 square miles of
Philadelphia. This will be the Nation's largest municipal WiFi
network, powered by the equivalent of just 600 light bulbs, 135
square miles will be lit by the promise of affordable broadband
access.
The wireless example also highlights an important misstep
in the staff draft relating to the lack of protections
guaranteeing interconnection and traffic exchange. 10 years
ago, wireless faced the same situation Internet voice traffic
does today: relatively few folks on a wireless network trying
to get connected to lots of folks on the incumbent telephone
companies' network. Recognizing their advantage, the phone
companies often required wireless to pay for calls into their
network and for calls from their network. In other words, head
I win, tails you lose, for the incumbent because wireless had
no negotiating leverage.
Fortunately, Congress took significant steps in 1993 and
1996 that recognized that given such a disproportion of market
power, a small network was never going to have even the chance
to become a big member. Unfortunately, the staff draft does too
little to address this practical problem. While the requirement
to interconnect is included, there is no meaningful
enforcement. FCC arbitration is possible, but with no criteria
or standards to define anti-competitive behavior. We are aware
that the staff draft has a major shortfall in this respect and
we urge that it be corrected.
Let me close with the third goal, a plea for a regulatory
timeout. Over the past 3 years, Telecom rules have been in a
constant state of flux. The staff draft remains largely silent
on the old debate of the past decade. I ask the subcommittee to
take a modest additional step, a step to an affirmative
timeout. The FCC has identified a clear investment-based path
to full deregulation. If an ILEC builds fiber to even 500 feet
of a customer's home or business, they are entirely free of any
loop unbundling obligations.
Congress should call a lengthy timeout against further
piecemeal litigation over loop unbundling, allowing EarthLink
and others to make investment decisions based on what is
happening in the marketplace, not what is happening in
regulator's offices.
Thank you for the opportunity to testify. We look forward
to your questions.
[The prepared statement of Christopher Putala follows:]
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Mr. Upton. Thank you. Mr. Rehberger?
STATEMENT OF WAYNE REHBERGER
Mr. Rehberger. Good morning, Chairman Upton, Chairman----
Mr. Upton. You need to hit that mike button as well.
Mr. Rehberger. Good morning, Chairman Upton, Chairman
Barton, and members of the committee. Thank you for inviting me
here today. Today I am testifying on behalf of XO
Communications. We are the largest competitive CLEC in the U.S.
today, and COMPTEL, the competitive communications industry
trade association, of which XO is a board member. I ask that
COMPTEL's analysis of the staff draft, which is included in my
written statement, be included as part of the record.
For decades, it has been the innovation of entrepreneurial
companies coupled with marketing open regulation--market
opening regulations, cost-based compensation for network
access, that have brought choice, lower prices, and new
technologies and services to the customer. If we look back a
little bit, we know that the Bell companies had DSL technology
years before the 1996 Telecom Act, but they never deployed that
technology until Covad aggressively deployed it. Until
recently, the Bell's had no incentive to offer VoIP technology,
until Vonnage paved the way in the consumer market, and
companies like XO offer VoIP products to business customers.
As I mention in my written statement, there appears to be
several mistaken assumptions underlying the draft regulation
related to Telecom. First, the draft seems to imply that
packet-switched Internet and circuit-switched network, or PSTN
networks, are physically separate networks. Consider the
following: in your home today, there is a wall jack that
connects the PTSN providing plain old telephone service to you.
If you plug your computer into that same jack, you have dialup
Internet access. And if you plug a digital subscriber line
modem into that very same jack, you can have high-speed
Internet access. That high-speed Internet access also allows
you to get voice over the Internet protocol, or VoIP, calls
over the exact same wall jack. Nothing has changed except for
the electronics that are attached to the wall jack and the
wires. However, under this draft, regulations will differ based
on the use of packet- or circuit-switching. In particular,
Section 105 appears to protect the competitor's access to
unbundled network elements and co-locations but it seems to
restrict such rights to only the circuit-switch world.
Furthermore, a telecommunication service qualifies for this
protection, possibly meaning that only the provision of
circuit-switch voice would qualify. It is not clear how
innovate companies who operate one integrated network and
provide both services would be able to comply with two
different regulatory regimes.
The second assumption is that voluntary commercial
negotiations for interconnection under Section 103 of the draft
will provide access to the incumbents' networks at rates and
terms that will continue to force their competition and
innovation. Decades of telecommunication history have proven
otherwise. Without the backstop of the 1996 Act, which requires
that interconnection be on just, reasonable and non-
discriminatory terms and conditions, provide--and it provides
effective enforcement mechanism, commercial agreements alone
would not have provided a viable option for competitors.
To compete, XO and other competitors have been building
fiber rings in the metro areas to carry traffic that is
aggregated from numerous business customers, and we also build
long-distance networks to carry aggregated traffic between
metropolitan areas. But, in the business market, it is a fact
that fewer than 10 percent of the office buildings in the U.S.
have alternative fiber connected to them. Instead, for over 90
percent of the buildings and those customers, the incumbents
and competitors alike use the connection to the building that
is owned by the ILEC. Speaking from XO's own experience, I can
assure the committee members that where the FCC has granted
relief of certain interconnection requirements, or access to
unbundled network elements, on many occasions, the Bell
companies have either refused to negotiate for use of their
networks, imposed conditions that have driven up customer
prices, or have made it uneconomical for us to compete. In some
instances, XO may be able to negotiate marginally better terms,
given our size and scale, but that won't be the case for the
hundreds of other competitors who are smaller than we are.
My final point to the committee is that the staff draft
would carve out the telecommunications industry as the only
network industry in America that does not operate under some
form of highly regulated network sharing. Competing electricity
providers share transmission access, competing rail providers
share rail access, and competing natural gas suppliers share
pipelines. In fact, the network sharing rules embodied in the
1996 Act have benefited the telecommunications industry for
over 10 years. They are the reason we continue to experience
the industry innovations and customer choice we have today. Why
should we all of a sudden treat the telecommunications industry
different based on the next popular technology.
Mr. Chairman, thank you for the opportunity to appear
before the subcommittee today, and I am happy to answer any
questions.
[The prepared statement of Wayne Rehberger follows:]
Prepared Statement of Wayne Rehberger, Chief Operating Officer, XO
Communications, Inc.
Mr. Chairman and Members of the Committee, thank you for inviting
me here today. I am Wayne Rehberger, Chief Operating Officer of XO
Communications, Inc. of Reston, Virginia. Today I am testifying on
behalf of XO Communications and COMPTEL, the competitive communications
industry trade association of which XO is a board member.
background on xo communications
XO Communications is the largest independent competitive local
exchange carrier providing telecommunications and broadband services.
Originally formed in 1996, XO has expanded its telecommunications
offerings from its original 4 small markets to 70 metro area markets in
26 states. Our company provides a comprehensive array of voice and data
telecommunications services to small, medium, and large business
customers. Our voice services include local and long distance services,
both bundled and standalone, other voice-related services such as
conferencing, domestic and international toll free services and
voicemail, and transactions processing services for prepaid calling
cards. XO data services include Internet access, private data
networking, including dedicated transmission capacity on our networks,
virtual private network services, Ethernet services, and web hosting
services.
XO has invested heavily in building its own facilities spending
over $8 billion and constructing over 1.1 million miles of fiber. We
have metro fiber rings to connect customers to our network, and we own
one of the highest capacity and scalable IP backbones in the industry,
capable of delivering data end-to-end throughout the United States at
speeds up to 10 Gigabits per second.
background on comptel
Founded in 1981, COMPTEL is the communications industry association
of choice and represents competitive service providers and their
supplier partners. Based in Washington, D.C., COMPTEL advances its
members' businesses through policy advocacy, education, networking, and
trade shows. COMPTEL members are entrepreneurial companies building and
deploying next-generation networks and services to provide competitive
voice, data, and video services. COMPTEL members create economic growth
and improve the quality of life of all Americans through technological
innovation, new services, affordable prices and customer choice.
COMPTEL members share a common objective: advancing communications
through innovation and open networks. For decades, it has been the
innovation of entrepreneurial companies coupled with market opening
regulations that have brought choice to customers and new technologies
and services to the market. The Bell companies had DSL years before the
1996 Act, but did not deploy this technology until Covad aggressively
deployed DSL. Same is true for VoIP. The Bells had no incentive to
offer VoIP, until Vonage paved the way. This tradition of competitive
innovation is continuing with the numerous companies that are creating
new ways to serve customers using cutting edge technologies. For these
reasons, I appear before the Subcommittee to voice significant concerns
with the staff draft
staff draft
In my testimony today, I will make the following points about the
discussion draft.
1) The discussion draft is based on a number of mistaken
assumptions.
2) The discussion draft would create ``gatekeepers'' to the
Internet.
3) The discussion draft adopts an approach that has been rejected
for every other networked infrastructure industry in the United States.
Mistaken Assumptions
The draft is based on a number of mistaken assumptions, which
include the following:
1) That the packet-switched Internet and the circuit-switched Public
Switched Telephone Network (PSTN) are physically separate
networks;
2) That competitors can easily build networks that reach end users; and
3) That voluntary negotiations without rules or enforcement will work.
A simple example illustrates why the first assumption is mistaken.
In your home today there is a wall jack that connects to the PSTN. If
you plug a phone into that jack you have voice service. If you plug a
fax machine into that same jack, you have an analog data service. If
you plug your computer into that same jack, you have dial up Internet
access, and if you plug a digital subscriber line (DSL) modem into that
very same wall jack, you have high speed Internet access. That high
speed Internet access also allows you to get Voice over Internet
Protocol--VoIP--from the exact same wall jack from which you have
gotten circuit-switched voice service for years.
So, what changed? Clearly the wall jack did not change, nor did you
get new wires strung to your house. All that changed were the
electronics that you and the phone company attached to that wall jack
and wires. The problem is that the draft bill aims to change the
regulatory regime based on the type of electronics attached by
differentiating between the uses of packet switching different from
circuit switching. XO, like many competitive companies, uses a
combination of packet and circuit switching in providing services.
Under this draft, my company would be forced to operate under two
separate and incompatible federal regimes.
What the above example illustrates is that the Internet is not a
separate network. Rather it is the term used to describe a multitude of
interconnected networks that all use a common protocol to communicate.
XO's network is part of the Internet, as are the networks run by AT&T,
SBC, MCI, Verizon, Global Crossing, Bell South, Level 3, Qwest, British
Telecom, and many others. These networks are interconnected today
because section 201 of the Communications Act and the Commission's
rules ensure that any party can get interconnection on just, reasonable
and non-discriminatory terms.
It's important to understand that the Internet is simply the next
evolution of the PSTN. Less efficient circuit switching is being
replaced with more efficient packet-switching, just as copper and
coaxial cable are being replaced with fiber because fiber is cheaper to
maintain and has far greater bandwidth. Like new parts added to an
older car to ``supe it up'' and make it go faster, fiber and newer
electronics have been plugged into the existing networks to convey
information faster. It's improved, but it's not a new network. Same
with the old car that contains a new fuel injection system or new
tires: it's improved, but it's not a new car.
The second mistaken assumption is that anyone who wants to compete
can build a network that reaches end user customers. COMPTEL members
can assure you that nothing is further from the truth. In fact, the
only ubiquitous wireline networks that exist today were all built in a
monopoly environment. The incumbent phone companies like Verizon, SBC,
BellSouth, and Qwest each had decades in which to build out their
networks to all homes and businesses. Likewise, the incumbent cable
companies like Comcast, Time Warner, Cablevision, and Cox all had at
least a decade of protected franchises in which to construct their
networks to residential users. In contrast, wireline competitors to the
incumbent phone and cable operators have had to build their networks in
the face of a competitor who already has a network and customers, and
consequently a revenue stream with which to pay for upgrades and
improvements to the network.
The story is somewhat different for wireless services, but only
slightly. In that case new PCS licenses were granted before the two
existing cellular licensees were firmly entrenched, but even so the two
largest network operators are owned by incumbent phone companies who
were holders of the original cellular licenses.
Another telling example is the current state of facilities based
competition in the business market. XO operates exclusively in the
business market today, which is more concentrated. It is a fact that
fewer than 10 percent of the office buildings in the U.S. have
alternative fiber connected to them. Instead, for over 90 percent of
the buildings, incumbents and competitors alike use the high speed
fiber connection to the building that is owned by the incumbent. In
this largely deregulated business marketplace, the market has decided
that it is not economically efficient to build multiple networks to
connect to the same building. Instead, what XO and other competitors
have been doing in an efficient and cost effective manner is building
fiber rings in metro areas to carry traffic aggregated from numerous
business customers, and also building long distance networks to carry
aggregated traffic between metropolitan areas. What this illustrates is
that the assumption in the bill that those who want to compete in
offering communications services to business and residential customers
can simply build their own network is mistaken due to basic
economically realities.
Finally, some view the voluntary commercial negotiations for
interconnection under Section 103 in the draft as a solution to provide
access to incumbent's networks at rates that will allow the competitor
to compete. Again, a simple review of actual behavior in the
marketplace demonstrates that this assumption is also mistaken.
Today all interconnection with networks that reach end users has
been accomplished by rule of law. Competitive carriers like XO get
interconnection to incumbent phone companies through under sections 201
and 251 of the Communications Act. Cable companies also get the
interconnection they need to provide Internet access and VoIP through
section 251, and also make use of special access circuits available
under section 201. Wireless carriers get access to the incumbent phone
networks under sections 201, 251, and 332(c) of the Communications Act.
Each of these sections not only require interconnection of networks,
they also require that such interconnection be on just, reasonable, and
non-discriminatory terms and conditions and provide enforcement
mechanisms. Yet for packet switched services this draft essentially
eliminates those requirements.
In the absence of such requirements, the market has already
demonstrated repeatedly that voluntary commercial negotiations will not
work. The requirements cited above were adopted by Congress in 1934
because AT&T was refusing to interconnect independent providers, in
1993 because incumbent phone companies were refusing to interconnect to
wireless carriers, and in 1996 because incumbent phone companies were
refusing to interconnect with competitors. Competitors have also found
it difficult to negotiate their way onto cable networks. Currently,
none have been able to do so.
Interestingly, the draft bill itself recognizes that voluntary
negotiations will not work to provide competition with respect to video
services. Section 304(a)(1)(E) of the bill would require the FCC to
apply to Broadband Video Service providers the same programming
ownership restrictions and regulations that are currently imposed on
cable operators. Those programming provisions were adopted by Congress
precisely because cable operators were refusing to permit competing
satellite providers to have access to programming shown on cable
networks. The Bell Companies, as new entrants into the video
marketplace, need those access requirements in order to offer competing
video service. If it is okay for the Bell companies to use their
network ownership to deny access to competitors except where voluntary
agreements provide such access, why then shouldn't the cable operators
be able to use their interests in video programming to deny video
content to Bell Companies except where the Bell Companies can negotiate
such access on a voluntary basis? COMPTEL and XO understand the need
for those programming access provisions to provide video competition,
and believe that the need for those provisions underscores the need to
continue similar requirements to ensure competition in communications
marketplace.
Finally, speaking from XO's own experience, I can assure the
committee members that in every instance in which the Regional Bell
Operating Companies have been relieved by the FCC of statutory
requirement regarding interconnection or access to unbundled network
elements, they have either refused to negotiate at all with respect to
allowing XO or other competitors to use their networks, or else have
imposed onerous terms and conditions that drive up customer prices and
limit competition. In some instances, XO may be able to negotiate,
given its size and scale. However, subjecting the entire industry to a
one-size fits all negotiation regime would amount to the equivalent of
trying to negotiate with a school bully for your lunch money while he
has you in a headlock.
Internet Gatekeepers
Because of its reliance on false assumptions, the draft bill would
result in the establishment of ``gatekeepers'' to the Internet. This
bill would create a world where the few companies that control the
network portals that reach end-users, the ``on-ramps'' to the Internet,
would be able to control access to the Internet from both the consumer
perspective and from the perspective of companies that must connect to
the Internet to conduct business. The reason they would be able to
exert this control is that everyone who seeks to offer content and
services over the Internet--whether it is Amazon seeking to sell books,
Yahoo! or Google offering search services and content, Disney seeking
to offer movies, Vonage seeking to offer VoIP, or XO offering
communications to businesses--all of us need to reach end users in
order to offer our services. Those who control the access to end users
ultimately control the Internet if there is no obligation to permit
competitors to access those end users on reasonable terms and
conditions.
The ``net neutrality'' provisions in section 104 of the draft bill
would do nothing to prevent incumbent network operators from acting as
gatekeepers for two reasons. First, because the interconnection
requirements in section 103 of the draft bill include no requirements
for direct interconnection on reasonable and non-discriminatory terms
and conditions, providers of content and services that compete with
those offered by the network operator that controls access to the end
user, the network operator will simply demand uneconomic terms and
conditions that effectively prevent competitors from offering services
over the operator's network. And for those competitors that nonetheless
attempt to provide service notwithstanding uneconomic interconnection
terms and conditions, the exceptions in section 104(b) for network
management, security, and provision of video or premium services
eviscerate the consumer protections purportedly provided in section
104(a).
The U.S. Economy Is Made Up Of Various Shared Networks
I think it is essential point out that the staff draft would carve
out the telecommunications industry as the only networked industry in
the history of America that does not operate under some form of
regulated network sharing. The electricity, gas, railroad and airline
industries all operate under a shared network structure that requires
network owners to provide access to their competitors in exchange for
cost plus a reasonable profit. It should apply the same principle to
the communications industry of today, and the future: access to all
public networks upon reasonable request at just and reasonable terms,
rates and conditions.
The draft before us today would allow competition only if
competitors were to first build redundant infrastructure to every home
and business in America. But time and again Congress has decided that
such redundancy is uneconomical. Furthermore, rational market players
would never undertake such an endeavor. As I mentioned earlier, XO has
invested over $8 billion in its own facilities. However, even with this
extensive network, we are nowhere close to having ubiquitous on-net
coverage. To build such a network would require over $100 billion and
many decades to construct--not to mention monopoly rights like the
Bells have had. Instead, we reach most customers by procuring
facilities or circuits from other providers.
Competitors want the right to build facilities when they determine
it makes economic sense to do so. In fact, XO is committed to building
additional facilities, but only if sufficient customer revenue exists
to justify the cost. However, that is very different from being
required to build facilities to every customer to whom one wishes to
offer service. If there were no existing facilities, obviously someone
wishing to offer service must construct them. But that is a very
different proposition from what competitors face today. Today every
existing home and business has at least one wireline communications
network already constructed to it. Well over 90 percent of those
customers, both business and residential, are passed by at least one
broadband pipe--fiber, coaxial cable, or DSL capable copper wire. In
light of these existing facilities, the only rational way for
competition to exist is by sharing the existing infrastructure--
regardless of whether that infrastructure was built by an incumbent or
a competitor.
Sharing infrastructure is not an unusual concept. In fact, it is
the norm rather than the exception. Congress did not require that
alternate energy providers build a second or third set of electrical
wires into each home in order to provide competition in energy pricing.
Instead, the grid is shared in exchange for cost plus a reasonable
profit. Competing railroads are required to allow the use of their
tracks by their competition. Gas suppliers must share a common
pipeline. Why? Because basic economic realities make it uneconomical to
build redundant networks to end users. Telecommunications is no
different and should not be treated differently.
conclusion
As my testimony illustrates, the problems created by the draft bill
are numerous and complex. If adopted it would create gatekeepers for
the Internet, with negative consequences that would ripple through all
segments of our Information economy. The bill would re-establish a
monopoly over communications services for most businesses in this
country, and at best would create a duopoly for most residential
consumers. I urge the committee to adopt positive and constructive
legislation that will give all competitors, and Internet users, access
to communications networks. This legislation need not be complex. It
should adopt basic rules that apply to all communications providers
that use public rights of way or spectrum--be they incumbents or
competitors and regardless of whether they use packet-switching,
circuit-switching, or copper, coaxial cable, fiber, or wireless. The
core principles should be service upon reasonable request, non-
discrimination, interconnection, unrestricted resale, and net
neutrality, with federal rules enforced by State commissions.
The bottom line is that the vibrant and competitive Internet that
we all increasingly rely on today is the result of over 30 years of
pro-competitive decisions by Congress and the FCC. Those decisions
regulated the transmission networks that make up the Internet, while
leaving the applications provided over those networks unregulated. By
removing the basic regulations governing the transmission networks,
this bill would permit private parties--namely the limited number of
private parties who built ubiquitous networks in a monopoly
environment--to use those networks to control access to the Internet.
One only has to refer to recent comments made by SBC's CEO, Ed Whitacre
in a recent Business Week interview: ``Why should they [competitors] be
allowed to use my pipes?'' This statement, alone, shows how anti-
competitive forces can have a debilitating effect on competition and
innovation.
Attached to my testimony is an analysis COMPTEL had prepared which
details specific problems with those provisions that are of the
greatest interest to COMPTEL members. In the interests of time, I
respectfully request that COMPTEL's analysis be included in the record
as part of my testimony. Thank you for allowing me to testify today on
behalf of XO and COMPTEL.
Mr. Upton. Thank you. Mr. Salas?
STATEMENT OF EDWARD A. SALAS
Mr. Salas. Good morning, Mr. Chairman and members of the
subcommittee.
Mr. Upton. You need to hit that button as well--mike
button.
Mr. Salas. Good morning.
Mr. Upton. No. It is not working? Sorry.
Mr. Salas. Good morning, Mr. Chairman and members of the
subcommittee. Thank you for holding this hearing today. I am
Edward Salas, Vice President of Network Planning for Verizon
Wireless. I am responsible for network strategy, planning,
purchasing, and administration. I am here representing Verizon
Wireless.
Verizon Wireless thanks you and your colleagues for your
time and effort put forth in working to craft legislation that
updates our Nation's telecommunications laws. We also
appreciate the attention that you gave to the concerns raised
by Verizon Wireless on the first draft. Specifically, we
applaud your efforts in streamlining the far-reaching national
consumer standards, welcome the progress toward improved net
neutrality provisions, and appreciate changes to the FCC's
role. We believe that these revisions were clearly a step in
the right direction, and it is Verizon Wireless's hope that as
the committee continues this drafting process, consensus is
reached on a bill that fosters competition, removes unnecessary
government regulation, and allows a deregulated market to bring
benefits to consumers.
The wireless industry has been a critical driver of the
national economy, generating tens of millions of new jobs,
building new communications infrastructure, and serving more
than 190 million Americans. With certain modifications, the
draft bill can lead to even more benefits to consumers and the
economy.
Today I will share with you some of our specific concerns.
I hope that we will have the opportunity to share with you some
additional concerns and suggestions as your legislative efforts
continue.
(1) Verizon Wireless is making major investments in
broadband wireless technology. Verizon Wireless is a firm
believer in the broadband future. We were the first company to
roll out what we consider real 3G services, and we are leading
the industry in broadband deployment. We first deployed our
EVDO service in October 2003 in San Diego and Washington, D.C.
We have invested well over $1 billion in expanding our EVDO
offering to encompass more than 170 major metropolitan markets
and 84 major airports across the nation, and we will continue
to expand the customers' ability to access this amazing
technology.
(2) Wireless broadband relies on IP technologies and
leverages our circuit-switch technology as well. For voice and
narrow-band data, our network operates over traditional
circuit-switch facilities. Our EVDO broadband service is
fundamentally an IP-based technology working over a standard
non-IP air interface, but all of our EVDO-based devices have a
circuit-switch capability to support all of our basic voice and
legacy services. Many of our competitors also deliver their
services over a single integrated wireless network, seamlessly
weaving high-speed and lower-speed capabilities, as well as
packet- and circuit-switch technologies.
(3) The draft bill maintains the old silo approach for new
technologies. Verizon Wireless agrees that IP-enabled services
are the platforms of the immediate telecommunications future.
On the other hand, the draft bill is structured along the lines
of the regulatory model for landline services that has been in
place for decades. Consumers don't know or care whether the
wireless services they buy are deployed over a packet
technology or a circuit-switch one. They simply want the
services and they want them to perform reliably. Attempting to
regulate such packet-switch digital services and applications
in silo-like regimes where service is provided over a single
platform may be regulated and taxed differently, will create an
administrative and regulatory nightmare.
(4) The draft bill does not expressly encompass mobile
wireless services. Verizon Wireless is also concerned that the
bill could be read to omit wireless altogether from the
landmark deregulatory approach that would apply to BITS
providers. The draft bill appears to require that a BITS
provider must use a packet-switch transmission service. As I
noted earlier, Verizon Wireless, and other wireless companies,
currently provide broadband service over an integrated platform
of both packet- and circuit-switch technologies. The two cannot
be segregated. It is time to remove the regulation for wireless
packet technology. Why should the analysis differ merely
because the broadband technology at some times and in some
places may rely on a hybrid circuit-switch-packet technology.
If the committee agrees, the simplest path to that result is to
modify the definitions of BITS provider to include all services
that are offered in conjunction with BITS.
(5) The net neutrality provisions should recognize the
uniqueness of wireless services. We have some--we do have some
concerns about the net neutrality, or access to BITS, in
Section 104 of the draft legislation because they do not appear
to acknowledge the critical technology distinctions between
wireline and wireless networks. The air interface on a wireless
network is significantly more bandwidth-limited than wireline's
dedicated fiber optic or copper facilities, and must be shared
by all users in a defined geographic area. Network performance
and resource availability in the wireless environment is thus
much more sensitive to variations in usage than a wireline
network. In order for us to ensure the integrity and
reliability of our network, and to provide consumers with the
best available online experience, we cannot support
unrestricted access to the Internet for downloading any and all
applications or the connection of devices not approved for use
on our network. Verizon Wireless does not block customers from
accessing the Internet as long as they are lawful and not
associated with any security or misuse risk. We believe we must
control the amount of resources that any individual customer
can demand from our network. The draft legislation is right to
preserve the BITS provider's authority to protect the security
and reliability of its network and broadband transmission
services, but it is not clear how this authority will be
reconciled with provider's duty not to block access to any
lawful content, application or service provided over the
Internet, and to permit subscribers to connect and use devices
of their choosing. At least in the wireless environment, the
device is, in fact, an extension of the network.
(6) Congress should make clear that wireless is to be
subject to Federal regulation. While it is clear that we are
trying to achieve the same result of a national deregulatory
framework, it is our belief that we may be subject to entirely
new, uncertain, complex re-regulatory regime. It would retreat
from and reverse the deregulation that has so served the
Nation's economy and wireless customers. Now more than ever,
States are attempting to reassert utility-type regulation over
the wireless industry. Ironically, at the same time, the
industry has been deploying national networks offering national
rate plans that offer unparalleled benefits for consumers.
States threaten to undermine these benefits by imposing a
patchwork of burdensome and inconsistent rules. Congress can
simultaneously recognize the benefits of competition and
prevent the harmful impacts of State-by-State regulation of a
national industry by completing the deregulation began in 1993.
The Federal Government is in the best position to oversee this
national industry which serves the public across and without
regard to State lines.
In conclusion, the committee took the first step in 1993.
You have a unique opportunity to buildupon that success.
Verizon Wireless hopes that as your legislative process
continues, you keep in mind the technical complexities of the
wireless network, and allow us the freedom to maintain our
network resources and the ability to secure our network. We
look forward to working with you in this process.
[The prepared statement of Edward A. Salas follows:]
Prepared Statement of Edward A. Salas, Vice President, Network
Planning, Verizon Wireless
Mr. Chairman and Members of the Subcommittee, thank you for holding
this hearing today. I am Edward Salas, Staff Vice President of Network
Planning for Verizon Wireless. I am responsible for network strategy,
planning, purchasing and administration. I am here representing Verizon
Wireless.
Verizon Wireless thanks you and your colleagues for the time and
effort put forth in working to craft legislation that updates our
nation's telecommunications laws. We also appreciate the attention that
you gave to the concerns raised by Verizon Wireless on your first
draft. Specifically, we applaud your efforts in streamlining the far-
reaching national consumer standards, welcome the progress toward
improved net neutrality provisions, and appreciate changes to the FCC's
role. We believe that these revisions were clearly a step in the right
direction, and it is Verizon Wireless' hope that, as the committee
continues its drafting process, consensus is reached on a bill that
fosters competition, removes unnecessary government regulation, and
allows a deregulated market to bring benefits to consumers.
Verizon Wireless views our appearance here today as an opportunity
to share our views on your revised staff draft, and offer some insight
on what we believe it will take to promote wireless competition, incent
continued investment that benefits the economy and subscribers, and
remove regulatory impediments that thwart innovation. This is the right
time, and the right opportunity, to complete the deregulatory process
for mobile radio services that Congress began in 1993 with passage of
the Omnibus Budget Reconciliation Act. Congress had the foresight to
recognize that removing wireless services from traditional, cradle-to-
grave utility regulation would unleash the competitive marketplace to
deliver benefits to consumers. Congress' expectation proved accurate.
The wireless industry has been a critical driver of the national
economy, generating tens of millions of new jobs, building new
communications infrastructure, and serving more than 190 million
Americans. With certain modifications the draft bill can lead to even
more benefits to consumers and the economy.
Today, I will share with you some our principal concerns. I hope
that we will have the opportunity to share with you some additional
concerns and suggestions as your legislative efforts continue.
1. Verizon Wireless is Making Major Investments in Broadband Wireless
Technology.
I first want to describe the actions our company is taking to offer
broadband services to our customers. There is no doubt that broadband
has enormous potential capabilities to deliver many features and
capabilities to wireless consumers. Voice, text messaging, email,
streaming video, emergency alerts, location services, and Internet
access are only some of the amazing capabilities that this technology
promises. Verizon Wireless is a firm believer in the broadband future.
We were the first company to roll out what we consider real ``3G''
services, and are leading the industry in broadband deployment. We
first deployed our ``EVDO'' service in October 2003 in San Diego and
Washington, D.C. EVDO, derived from the CDMA 2000 technology family,
increases peak data download speeds up to 2 Mbps, and typical, user-
experienced download speeds range from 400 to 700 kbps. With EVDO,
users can access exciting video applications via their handsets over
our VCast service, or access the Internet through a wireless modem
``aircard'' that is inserted into a laptop computer. We have recently
reached agreement with three major computer manufacturers to
incorporate this capability directly into their laptops. We have
invested well over $1 billion in expanding our EVDO offering to
encompass more than 170 major metropolitan markets and 84 major
airports across the nation, and we will continue to expand the
customers' ability to access this amazing technology.
2. Wireless Broadband Relies on IP Technology and Leverages Our Circuit
Switched Technology as Well.
It is important to understand that Verizon Wireless and other
wireless providers are using both IP and non-IP interfaces in their
networks. For voice and narrowband data, our network operates over more
traditional circuit switched facilities; at other times and places we
operate in packet mode. Our EV-DO broadband service is fundamentally an
IP-based technology working over a standard non-IP air interface, but
all of our EVDO based devices have a circuit switched capability to
support all of our basic voice and legacy services. Many of our
competitors also deliver their services over a single, integrated
wireless network, seamlessly weaving high-speed and lower-speed
capabilities, as well as packet and circuit-switched technologies. The
mix of packet and circuit technologies--and high-speed and lower-speed
services--varies widely not only among wireless companies, but also in
different geographic areas served by the same company. Moreover, that
mix is constantly evolving as each wireless competitor works to offer
the latest services to its customers including voice, Internet access,
games, photos, music, and video services.
3. The Draft Bill Maintains the Old Silo Approach for New Technologies.
Now I'd like to talk about how the draft bill fits or doesn't fit
with the reality of integrated, ever-evolving technology of wireless
broadband. On the one hand, the draft bill rightly focuses on IP-
enabled services, where the technology is going, not where it has been.
Verizon Wireless agrees that IP-enabled services are the platforms of
the immediate telecommunications future. On the other hand, the draft
bill is structured along the lines of the regulatory model for landline
services that has been in place for decades. Therefore, it incorporates
the burdens of where we have been, rather than where we are going. It
adopts multiple new classifications and definitions and applies
different regulatory regimes to each. Verizon Wireless has concerns
about this approach. The draft does not grapple with the rapid
technological change, particularly in wireless, that eradicates these
distinctions. Consumers don't know or care whether the wireless
services they buy are deployed over a packet technology or a circuit-
switched one. They simply want the services and want them to perform
reliably. Attempting to regulate such packet switched digital services
and applications in silo-like regimes, where services provided over a
single platform may be regulated and taxed differently, will create an
administrative and regulatory nightmare.
Our concern is that these regulatory distinctions will have the
unintended consequence of impeding the innovations and growth of even
newer services that are arising precisely because the distinctions
among services to users are blurring.
4. The Draft Bill Does Not Expressly Encompass Mobile Wireless
Services.
Verizon Wireless is also concerned that the bill could be read to
omit wireless altogether from the landmark deregulatory approach that
would apply to ``BITS'' providers. The draft bill appears to require
that a BITS provider must use a packet-switched transmission service.
As I noted earlier, Verizon Wireless (and other wireless companies)
currently provides broadband service over an integrated platform of
both packet and circuit-switched technologies. The two cannot be
segregated.
If the committee believes that it is time to deregulate competitive
telecommunications services--a view Verizon Wireless strongly
endorses--it needs to craft a definition of a BITS provider that
includes all wireless technologies. If it is time to remove regulation
for wireless packet-technology, why should the analysis differ merely
because the broadband technology at some times and in some places may
rely on a hybrid circuit-switched-packet technology (1xRTT has circuit
switched layer and a packet layer)? In our view, the right course is to
recognize it is time to remove the last vestiges of common carrier,
utility-type regulation from wireless. If the Committee agrees, the
simplest path to that result is to modify the definition of BITS
provider to include all services that are offered in conjunction with
BITS or carried on the same network platform as BITS.
5. The Net Neutrality Provisions Should Recognize The Uniqueness of
Wireless Services.
If Verizon Wireless in fact qualifies as a BITS provider, we
applaud the general approach of the draft bill to treat us as an
interstate, national service. We do have some concerns about the ``net
neutrality'' or ``Access to BITS'' in Section 104 of the draft
legislation, because they do not appear to acknowledge critical
technology distinctions between wireline and wireless networks. The air
interface on a wireless network is significantly more bandwidth limited
than wireline's dedicated fiber optic or copper facilities, and must be
shared by all users in a defined geographic area. Moreover, various
mobile applications place varying demands on this resource as well as
the traditional load characterized by the raw number of customers
operating in a cell. Network performance and resource availability in
the wireless environment is thus much more sensitive to variations in
usage than a wireline network.
We will certainly offer subscribers service plans that involve
varied and reasonable bandwidth and capacity limitations and services
that protect consumers from unwanted content or messages. However, in
order for us to ensure the integrity and reliability of our network,
and to provide consumers with the best available on-line experience, we
cannot support ``unrestricted'' access to the Internet for downloading
any and all applications, or the connection of devices not approved for
use on our network. Verizon Wireless does not block customers from
accessing the Internet as long as they are lawful and not associated
with any security or misuse risk. But we believe we must control the
amount of resources that any individual customer can demand from our
network. As managers of that resource, we need that flexibility so that
we can provide our subscribers with the most reliable, consistently
excellent mobile on-line experience that our network will support.
The draft legislation is right to preserve a BITS provider's
authority to ``protect the security and reliability of its network and
broadband transmission services,'' but it is not clear how this
authority will be reconciled with the provider's duty not to block
access to ``any lawful content, application or service provided over
the Internet,'' and to permit subscribers ``to connect and use devices
of their choosing.'' At least in the wireless environment, the
``device'' is in fact an extension of our network. In fact, under FCC
rules, every one of our handsets, PDAs and air interface cards is
licensed by the Commission and must comply with strict technical
requirements. If we must allow customers to attach devices ``of their
choosing,'' how can we be sure that we comply with the terms of our FCC
licenses? We are not talking about plugging fax machines onto a
landline network but about devices with complex and dynamic
functionality that not only manage the applications we sell but enable
basic radio connectivity and participate with the network in managing
RF power settings. We test and certify every device on our network with
great care and diligence. This process cannot be abdicated to the
consumer.
Consumers have multiple choices of wireless services as well as
multiple broadband choices. In this context, there is no need to
encourage consumers to second-guess the decisions of wireless network
operators on how to run the network. We will respond to consumer demand
for connectivity in the most efficient and effective ways available on
our network. If we do not offer customers the features and capabilities
they demand, they will ``vote with their feet'' and switch to a
competitor. We are incented to provide the services that customers
want.
The net neutrality provisions should not substitute for the
incentives we and other wireless carriers have to serve consumers.
Either such provisions are going to be too rigid and inflexible--
discouraging innovation--or they are going to be too vague--leading to
uncertainty and litigation. While the draft bill allows us to take
``reasonable measures'' to protect the security and reliability of our
network, who is going to determine when a measure is ``reasonable''? We
thus recommend that Section 104 be modified to make clear that wireless
BITS providers have the right to manage their network and the devices
that can be used with that network.
6. Congress Should Make Clear that Wireless is To Be Subject to Federal
Regulation.
While it is clear that we are trying to achieve the same result of
a national deregulatory framework, it is our belief that we may be
subject to an entirely new, uncertain, complex and re-regulatory
regime. It would retreat from and reverse the deregulation that has so
served the nation's economy and wireless customers. As creatures of a
deregulatory environment, the simple thought of new regulatory
compartments and obligations gives us pause. Verizon Wireless does
believe that a national deregulatory regime for wireless is possible--
and much simpler.
Now, more than ever, states are attempting to reassert utility-type
regulation on the wireless industry. Ironically, at the same time the
industry has been deploying national networks and offering national
rate plans that offer unparalleled benefits for consumers, states
threaten to undermine these benefits by imposing a patchwork of
burdensome and inconsistent rules. Left unchecked, these re-regulatory
efforts will force wireless carriers to follow different rules in
different states and undo the benefits of deregulation--a result
antithetical to Congress' goal in 1993. We have some states attempting
to dictate the contents of our bills--an effort that will inevitably
lead to varying, inconsistent requirements in different states. In 2005
alone, 18 states attempted to impose their own regulatory regimes on
us. We have others attempting to control our rates, despite Congress'
clear command in 1993 that the market, not public utility commissions,
should regulate rates. Still other states are not taking any action.
Exclusive federal oversight and regulation, where necessary to protect
consumers, is the right approach for the wireless industry.
Congress can simultaneously recognize the benefits of competition
and prevent the harmful impacts of state-by-state regulation of a
national industry by completing the deregulation began in 1993. The
federal government is in the best position to oversee this national
industry, which serves the public across and without regard to state
lines. Verizon Wireless urges the Committee to clarify that the
deregulatory provisions in Section 101 apply to all wireless services.
This will help ensure that, as we and our competitors make further
investments in national broadband services that benefit the public as
they work and travel across the nation, we are regulated consistently,
and at a national level.
Conclusion: The Committee took the first step in 1993. You have a
unique opportunity to build upon that success. Verizon Wireless hopes
that as your legislative process continues, you keep in mind the
technical complexities of the wireless network and allow us the freedom
to maintain our network resources and the ability to secure our
network. We look forward to working with you in this process.
Mr. Upton. Thank you. You are going to hear the buzzers
ring here in a second. We are about ready to have three votes,
so I think at this time--yes. That is right. I think we are
going to take a short recess, and we will come back at 12:35.
We will begin with Mr. Willner at 12:35.
[Brief recess.]
Mr. Upton. I hope you got lunch.
Mr. Willner. No.
Mr. Upton. We didn't either.
Mr. Willner. We are equally hungry.
Mr. Upton. I would have said one if I had known those three
votes would have taken a little bit longer. Mr. Willner?
STATEMENT OF MICHAEL S. WILLNER
Mr. Willner. Thank you, Mr. Chairman, and the rest of the
members of the subcommittee, and thank you for inviting me to
speak on behalf of the National Cable and Telecommunications
Association. I am pleased to address the issues surrounding the
BITS bill.
Ladies and gentlemen, I will remind you once again, it is
the cable industry that has invested more than $100 billion to
bring new and advanced 21st Century services to millions and
millions of American homes, and we did so without any
government handouts. We agree with you that new technologies
like IP are changing the competitive landscape for all
communication services. A fresh look at the regulatory
framework established in 1996 is indeed in order, but we are
concerned about the bill's technology specific focus.
If Insight's chief technical officer has to check with a
barrage of regulatory lawyers before he decides to add new
features and functions to our network, that would stifle
innovation. If a technical design of our network determines how
we are regulated, that will skew investment toward technologies
that meet regulatory rather than marketplace demands. How is
that good for consumers?
We believe that any review of current law should be guided
by three basic principles. First, like services should be
treated like, and all providers of those services should play
by the same rules. What matters to consumers is not the
technology used to provide services, but the services
themselves. Second, there should be minimal economic
regulation. Cable's investments in digital television,
broadband, and VoIP did not require the carrot of regulatory
benefits, just the promise of new customers signing on for the
service. And finally, we believe that local governments have an
important role to play in ensuring that video service providers
make services available to all citizens in a timely and fair
fashion.
Unfortunately, the current draft creates different
regulatory regimes for like services. Regulatory treatment
would turn on whether a provider uses packet-switch
transmission or not, whether particular offerings are--and I am
going to quote--``subsumed in or subsuming'' others, and
whether a customer can ``integrate'' ``customizable voice and
data capabilities'' with ``two-way'' video programming. You
know, sitting here today, I don't think any of us in this room
has the same idea of what all those terms mean.
There are two dangers with having the government picking
technology winners and losers, particularly in a field as
rapidly changing as telecommunications. The initial technology
choice may be wrong, and government cannot anticipate what is
just around the corner. For example, the FCC came close to
mandating analogue high-definition television in the 1980's,
and 30 years earlier chose a color television standard that was
incompatible with existing black and white televisions before
reversing itself. That probably significantly slowed down the
development of color TV. 10 years ago, ATM and ISDN were hot
transmission protocols, but mandating them would probably have
prevented the rise of IP and today's Internet as we have grown
to know it.
Technology is not relevant to drawing regulatory
distinctions among multi-channel video distributors. Many of
the services and features SBC identifies as IP-based are
provided already by cable companies without using IP, including
subscription video on demand, multiple camera angle viewing of
live sporting events, live traffic, weather reports. Cable
operators will undoubtedly increase the use of IP. We already
use it in certain applications. But the competitive market, not
the regulatory environment, should prompt that action.
The draft bill also creates more regulation at a time when
competition should result in less regulation, adding three new
silos to the existing ones for voice, video and data, means
that providers could fall into 1 or more of 6 different
regulatory categories. I am particularly concerned about the
bill's first-time ever regulation of Internet access services
in the form of net neutrality. In the absence of any evidence
that cable operators have or are blocking customer access to
content, a government mandate is indeed premature. The open-
ended nature of this unnecessary mandate will definitely trap
broadband providers into a morass of litigation for years to
come.
The cable industry has always worked closely with this
committee, and we stand ready to work with you to craft
revisions to the Telecommunications Act that reflect not only
today's realities, but also anticipates tomorrow's
developments.
You know, I will tell you, as a cable operator in States
like Indiana and Kentucky, you learn a lot about basketball,
and one thing I have learned is that whether you are a Hoosier
fan or a Cats fan, nothing makes both sides more angry than the
referees deciding who is going to win the game. It should be
the players on the field. And with this draft, I am afraid that
Congress is becoming dangerously close to wearing a black-and-
white striped shirt--vertical striped shirt, as the referees in
this game.
Thanks again for inviting me to testify. I will end it on
that note.
[The prepared statement of Michael S. Willner follows:]
Prepared Statement of Michael S. Willner, President and CEO, Insight
Communications
Mr. Chairman and Members of the Subcommittee, thank you very much
for inviting me to speak with you today on behalf of the National Cable
& Telecommunications Association regarding the new discussion draft
legislation addressing Internet Protocol (IP)-enabled and broadband
services.
As you know, the cable industry has invested significantly--more
than $100 billion since 1996 and nearly $10 billion this year alone--to
bring advanced video, high-speed Internet access, and now voice
services to tens of millions of Americans across the country. My own
company, Insight Communications, has invested hundreds of millions of
dollars upgrading and building systems in the last eight years.
Broadband is virtually rolled-out to all areas served by the company.
Four markets have circuit-switched telephone service and the rest are
in the process of rolling-out IP telephony. Cable therefore has a
fundamental stake in the ongoing efforts to revise the Communications
Act.
The discussion draft is an ambitious effort to devise a national
framework for advanced voice, video, and data services. NCTA agrees
with you and others on the Committee that new technologies like IP are
changing the competitive landscape for all communications services. The
use of IP, for example, can facilitate true intermodal competition in
all services. The transition from analog to digital video, while not
yet complete, is already providing consumers with a more robust array
of services and the ability to customize what they watch and when.
Other technological developments will offer the ability to access
content and information anywhere.
Given the scope and pace of these advances, it is appropriate to
take a fresh look at the regulatory framework established in 1996--not
in order to codify a particular technology as the touchstone of policy,
but to reform and hopefully reduce regulation for all providers in way
that does not impede future advances. With respect to multichannel
video in particular, competition warrants a comprehensive re-
examination of the existing regulatory framework adopted more than 20
years ago when the video marketplace was far less competitive.
While we agree that a fresh look at regulation is needed, we have
serious concerns with the direction and approach of the draft bill. In
particular, it treats functionally equivalent services differently,
conferring a regulatory advantage on particular technologies. Rather
than simply deregulate where market forces warrant, the bill erects a
complex new scheme for IP-based and other ``integrated'' services.
Regulatory treatment will turn on whether a provider uses packet-
switched transmission or not; whether particular offerings are
``subsumed in or subsuming'' others; and whether a customer can
``integrate'' ``customizable voice and data capabilities'' with ``two-
way'' video programming. The bill is also overregulatory, including
first-time-ever regulation of the Internet in the absence of market
failure that might justify that regulation.
The uncertainties inherent in this approach and the government
micromanagement it invites are unlikely to provide the stable
regulatory framework that promotes investment and innovation. By
contrast, when Congress largely eliminated economic regulation of the
cable industry in 1996 and largely got out of the way of our broadband
deployment, cable responded with $100 billion in new investment and an
array of advanced services that consumers have embraced.
principles for reviewing current law
We believe that any review of current law should be guided by three
principles.
First, like services should be treated alike, and all providers of
those services should play by the same rules. What matters to
consumers, and what should matter to policymakers, is not the
technology used to provide services, but the services themselves.
Second, there should be minimal economic regulation, allowing
competition to rely on market forces wherever possible. The market has
worked well to ensure that new developments enabled by technological
advances and the integration of advanced services reach consumers.
While the Bell companies have touted the integrated features they will
offer if granted favorable regulatory treatment, cable offers those
services and features today--and did so as soon as the market showed
interest, regardless of regulatory benefit.
For example, just last week, Sprint Nextel, Comcast, Time Warner
Cable, Cox Communications and Advance/Newhouse Communications announced
the formation of a joint venture, designed to accelerate the
convergence of video, wireline, wireless and data communications
products and services and bring exciting new capabilities to
subscribers. Customers will be able to purchase a ``Quadruple Play'' or
any combination of services, have access to a wireless ``third
screen,'' and enjoy other features that integrate cable and wireless
services all on a single device. Time Warner customers in some markets
today can have a caller ID flash on their television screens when they
get a telephone call. Cablevision customers can check their home
voicemail from any Internet connection in the world.
The market has responded well to the new services cable offers.
There are over 26 million digital cable customers--up from 12 million
in 2001. Upgraded cable systems can offer telephone service over the
same cable line that already carries digital video, high speed
Internet, and other advanced services to consumers. As of the end of
the Second Quarter of 2005, major MSOs--including Insight, Cox,
Charter, Comcast, Cablevision, and Time Warner, along with other cable
operators--served approximately 4.4 million residential cable phone
customers across the country.
These developments did not require regulatory prompting; they were
driven by market demand. Companies facing fierce competition will
respond to what consumers want, as providers continuously seek to
differentiate themselves and their products and services. Their
response should not be driven, or even affected, by a need to fit a
service into a particular regulatory box. A regulatory scheme that
successfully encourages innovation will not require providers to spend
time debating which side of the line a service feature puts them on.
Finally, certain universally recognized social responsibilities
must remain in place for all providers of communications services. In
the context of voice services, those responsibilities include 911 and
E-911, cooperation with law enforcement, and support for universal
service within a competitively neutral regime. On the video side, new
services and features should not be developed for, and available to,
just the wealthiest subscribers--it should be an important part of the
role of all providers to ensure that their service reaches every
segment of society. While regulation should be no greater than what is
necessary to ensure the fulfillment of those responsibilities--and
there is room to make them consistent across providers--these important
public protections should not be abandoned.
concerns with the discussion draft
Measured against these objectives, the discussion draft raises a
number of concerns.
First, the draft bill creates different regulatory regimes for like
services based on technological distinctions. There are two dangers
with having the government picking technology winners and losers,
particularly in a field as dynamic as communications--the initial
technology choice may be wrong, and government cannot anticipate what's
around the corner. A technology-based approach creates a perverse
incentive for providers to select the technologies they use based on a
particular regulatory result even if they do not necessarily respond to
consumer demand most effectively and efficiently, and it may lock them
into particular technologies long after those technologies have
outlived their usefulness.
It wasn't too many years ago, for instance, that this Committee was
close to endorsing an analog version of HDTV that would have required
as much as 12 megahertz of bandwidth for each video channel.
Fortunately, digital technology emerged quickly enough to prevent
enactment of that policy. Another example from history, this one
involving a transmission technology, is perhaps even more relevant to
the current effort. Ten years ago, asynchronous transfer mode (``ATM'')
was considered a primary protocol for networks (strongly promoted by
the telephone companies), and IP was thought to be not as applicable
for the transmission of data. If Congress had mandated ATM, it would
have dramatically slowed the growth of the Internet, and IP's growth
would have been hampered.
A more current example that shows the flaws of technology-based
regulation is the use of IP to deliver video programming. Some have
argued that IP video should be subject to a new regulatory regime, but
the fact is that cable operators already use IP transport at various
points in their networks, including cable modem service and backbone
networks. There is no technical limitation to cable operators adopting
IP technologies in their retail video services. Such services are being
field tested by Time Warner in San Diego and are being studied by the
engineering departments of all of the major multiple system operators,
including Insight.
SBC has also proposed to use IP in its video distribution network,
reportedly to transport and deliver video to the customer premises. At
least in part, this appears to be a function of the limited bandwidth
available to SBC over its existing copper facilities to transmit video
to the home, which required SBC to find a means to deliver only a few
channels at a time to the customer rather than all channels as cable
has traditionally done. Significantly, many of the services SBC
identifies as IP-based are being provided by cable companies today
without using IP, including subscription video-on-demand service,
multiple camera angle viewing of live sports programs, live traffic and
weather feeds.
The point is that as it becomes useful to introduce IP (or any
other new technology) into the distribution of video services, all
providers, including current cable operators, will do so. The
regulatory scheme should be structured to encourage, not interfere
with, that natural progression. By contrast, a law that favors
particular technologies over others will skew this progression and
risks deterring innovation and undermining efficiency. Government
should not be in the business of picking technology winners and losers.
That should be left to the market.
The same danger arises if Congress anoints a particular service for
favorable regulatory treatment, as the discussion draft does with
broadband video. The features and functions that policymakers demand
may not be the same ones that the marketplace wants. In the interest of
favorable regulatory treatment, providers may end up devoting
significant resources to developing services that consumers have no
interest in. In that case, providers and consumers lose. The market,
not the government, should drive the course of innovation and
investment.
Second, the draft bill favors regulation over market forces.
Indeed, it complicates the existing regulatory framework by adding
three new regulatory ``silos'' in addition to the existing ones for
voice, video, and data. Providers could fall in one or more of six
different regulatory silos, each with different, and not always
consistent, responsibilities. With regard to video, the bill's
``broadband video service'' would be the fifth category of multichannel
provider--after cable, DBS, wireless cable, and open video systems--
exacerbating rather than simplifying the current existing competitive
imbalance among such providers.
With respect to broadband services, the bill appears to impose
forced access obligations on facilities-based Internet access
providers, overturning the Supreme Court's Brand X decision and the
FCC's recent Wireline Broadband Order. Forcing facilities-based
providers who have chosen not to hold themselves out as common carriers
to share their facilities with competitors will deter investment in new
networks. By interfering with the property rights of those providers,
it also raises a significant takings issue. While perhaps inadvertent--
the problem arises from the fact that the definition of BITS now
encompasses both the offering of ``pure'' transmission as well as
Internet access service--it is an issue that need not be reopened at
all.
What is not inadvertent is the first-time-ever regulation of
Internet access services themselves in the form of a ``net neutrality''
requirement. While the recent revisions to the bill, such as allowing
BITS providers to take reasonable measures to protect network
reliability, impose some limits on this regulation, there remains a
grave danger that these regulations will lock providers into certain
business or technology arrangements and hamper their ability to respond
to market needs.
In particular, what constitutes ``impair[ing]'' or ``interfer[ing]
with'' the use of content or services would be the source of constant
litigation or the threat of litigation, creating a persistent and
deadening overhang to the deployment of broadband services. Anyone
unhappy with the terms of their business deal with a broadband provider
would inevitably race to the FCC or the courthouse alleging a
violation. Given the inherent open-endedness of concepts like
``impairment'' or ``interference,'' a provider would have no way of
knowing whether the practice complained of will be found to be
reasonable or an instance of unlawful interference. Under such a
scheme, providers will have little incentive to innovate or to
differentiate themselves in the marketplace.
The fact is that nearly everyone in the industry engages in some
activity that arguably would fall under the bill's definition of
``interfer[ence]'' with content or access. For example, several years
ago, in an effort to discourage the posting of commercial messages
(``spam'') on its multiple message boards, Yahoo! adopted a policy of
blocking access to Web addresses advertised in spam messages. While
some viewed this as a consumer-friendly move, others suggested that
Yahoo!'s motive was to hinder competitors--and, in fact, Yahoo
acknowledged that ``some of the Web sites . . . blocked from its
finance section [were] competitors.'' Yahoo! and other web portals also
have agreements with certain content providers to feature their content
or links to particular sites. Microsoft requires people to use Internet
Explorer to view streaming video on its MSNBC web site. If the
government installs itself to police these kinds of business
arrangements, it will seriously compromise the ability of network and
content providers to devise new offerings and respond to market
demands.
Finally, with respect to matters where continued regulation is
necessary, particularly in the area of interconnection between new
broadband networks and the public switched network, the staff draft
does not provide sufficient safeguards. While the cable industry
generally supports reducing regulation, the public switched network
presents a special case: since the vast number of voice customers will
use that network for the foreseeable future, no voice competitor can be
successful unless its subscribers can terminate calls to that network
and receive calls that originate on it.
There is, very simply, nothing quite like the public switched
network. DBS operators did not need to interconnect with cable systems
to compete (Congress did conclude that they needed access to cable
programming, however), and the ``network of networks'' architecture of
the Internet is distributed rather than centralized. So long as the
PSTN maintains its unique position for voice services, however, the
Bell companies who control it will have a correspondingly unique
incentive and ability to frustrate competition by impeding
interconnection with other voice providers, regardless of whether those
providers use IP or some other technology. New entrants, by contrast,
lack the incumbents' customer base and bottleneck control. As Congress
recognized in 1996, interconnection with the incumbents must be
available on just, reasonable, and nondiscriminatory rates, terms, and
conditions if broadband competition is to succeed.
an alternative approach
The starting point for reform of our communications laws should be
to identify the problem that needs to be fixed and then to develop a
focused response. Legislation focused on IP or any other particular
technology sidesteps this fundamental question and, as I've suggested,
will skew investments and inevitably become obsolete.
The communications marketplace is changing before our eyes, almost
weekly. Entrepreneurs, inventors, service providers, and investors are
not waiting for legislation to point the way to the next big thing.
What is needed is a regulatory framework that recognizes these
changes--and the sheer pace of change--by streamlining existing law
where there is competition and by giving the FCC the tools to adapt the
remaining requirements to new competition as it develops. The current
environment offers the opportunity to reexamine and reevaluate all
current regulation of voice, video, and data and remove barriers or
burdens that are unnecessary because of the enhanced competition that
IP and other technologies make possible.
For those regulations deemed necessary to retain at this time,
legislation could set a clear path for their reexamination and removal
as they, too, become outmoded. The FCC's forbearance authority could be
extended beyond telecommunications services and the Commission could be
required to forbear from all unnecessary regulation, taking into
account competition from functionally equivalent offerings, regardless
of technology or regulatory classification. Of course, any new
framework should also ensure that providers continue to fulfill
important social responsibilities.
We believe that this approach, designed to reflect the new
competitive world and grow with it, would far better serve the needs of
competitors and consumers than the approach suggested in the draft
bill. To the extent the Committee intends to pursue the approach
outlined in the draft bill, however, we would offer the following input
about the draft provisions.
specific comments on the bill
Above I outlined our general concerns with the discussion draft.
More detail on each of these concerns follows below.
Like Services Are Not Treated Alike
As noted above, we have serious concerns with subjecting services
that are functionally the same to different--and in some cases, very
different--regulatory treatment. The draft bill is built on technology-
specific distinctions that may not have real relevance in the
marketplace or enhance competition or functionality. By way of example:
packet-switched transmission is subject to the bill, while circuit-
switched transport is subject to existing law;
the definition of ``packet-switched service'' appears to require the
separate routing of every packet, but not all packet-based
protocols perform routing functions for every packet;
requirements applicable to a BITS provider are limited to facilities-
based providers, placing such providers at a competitive
disadvantage vis-a-vis non-facilities-based broadband
providers, such as Microsoft, Yahoo!, eBay, and other ``edge''
providers (in addition to Earthlink and other ISPs), who are
mounting competitive challenges to facilities-based
communications providers;
the bill excludes ``any time division multiplexing [TDM] features,
functions, and capabilities'' from the definition of BITS, even
when the service (such as cable modem, DSL and FTTH) utilizes
TDM and TCP/IP;
there are different interconnection rules for VoIP providers and
providers of conventional telephone service; and
the bill foresees the use of ``successor protocol[s]'' only to ``TCP/
IP'', but TCP is only one of many IP protocols.
In each of these cases, there does not appear to be any rational
basis for selecting only certain IP technology for favorable treatment,
when the service being provided may or may not benefit from that
technology and the subscriber may or may not even know it is being
used. We believe the bill should eliminate such distinctions.
Similarly, under the draft bill, broadband video service must be
offered in a manner that allows subscribers to ``integrate'' the video
aspects of the service with ``customizable, interactive voice and data
features,'' even if a subscriber never uses these features and receives
only video programming service that looks exactly like a cable service.
The draft bill also removes certain obligations only from broadband
video service, rather than consider whether they no longer make sense
for any provider of multichannel video.
Many of NCTA's members may already be offering ``broadband video
service'' as it is currently defined and would therefore qualify for
and benefit from some or all of the bill's favorable regulatory
treatment. As noted above, some cable systems have integrated their
video and telephony service features to allow television viewers to
receive caller ID on their television screens.
Whether or not a cable company's offering meets the definition of
broadband service--and the myriad undefined attributes of this service
make it impossible to know for sure--we do not believe the bill's
approach provides a sound foundation. While it is true that all
``broadband video service providers'' would be treated the same, in
fact broadband video providers would be treated differently from cable
operators against whom they compete solely on the basis of
technological distinctions like the ``integration'' of ``customizable,
interactive'' voice and data features. Even if customers forgo those
features in favor of multichannel video that is functionally
indistinguishable from cable service, the broadband video service
provider retains its regulatory advantage over a cable operator.
In an industry as dynamic as video, moreover, technology-based
distinctions will rapidly become obsolete. Any new legislative
framework should be able to guide industry and government through
changes in technology. The discussion draft, by contrast, will likely
need to be amended even before it passes into law to account for new
development that will inevitably emerge in the coming months.
Competitive forces should and will propel providers to use the
technologies that enable them to offer the services and features
consumers want. Government interference in that natural process is far
more likely to hinder than encourage this result.
The Bill is Overregulatory
We also believe the draft bill unnecessarily imports too much
traditional utility regulation to competitive broadband services. It
imposes numerous requirements on VoIP, BITS and broadband video
services even where the competitive need to attract customers to these
new services has proven sufficient to discipline competitors' conduct,
and no market failure justifies a change in regulatory treatment. While
the consumer protection standards in the discussion draft have been
narrowed, for instance, they remain overbroad. The result is the
imposition of extensive new and burdensome regulatory requirements for
services that have flourished without government involvement and
without any demonstration of market failure. Truth-in-billing and other
requirements--many of which have served as vehicles for unwarranted
class action lawsuits--are unnecessary, particularly if providers
remain subject to State laws of general applicability. In some cases,
such as the bill's privacy and disabilities' access requirements, the
draft imposes even stricter standards on broadband providers than those
imposed on traditional providers.
By defining BITS to include Internet access service, moreover, the
bill would impose these obligations, along with federal registration
obligations and other utility-style requirements designed for monopoly
common carriers, on facilities-based Internet access providers such as
cable who only recently won the right to be free from regulation.
By far the most extreme example of unnecessary regulation, however,
is the imposition of so-called ``net neutrality'' requirements on BITS
providers. As discussed above, we believe the net neutrality
requirement is a solution in search of a problem and would represent an
unprecedented regulation of Internet services. Cable operators are not
blocking consumers' access to Internet content, applications, or
services or restricting the attachment of customer equipment. Although
there have been claims that cable could use control of its broadband
network to act anticompetitively, there has been only a single unproved
allegation that a cable operator has done so. The cable broadband
network is also designed to accommodate any gaming devices, or any
other computing device the customer wants to use. Cable companies have
no incentive to block content, applications, or services and thereby
drive customers to DSL, satellite broadband, or other competitors
waiting in the wings.
The harm to society from a net neutrality requirement would vastly
outweigh any potential benefit. Requiring cable operators to offer
cable Internet service in a particular way may lock them into business
or technology arrangements that prevent them from responding to
customers' changing interests or marketplace reality. As I explained
earlier, a broad requirement ``not to block, impair, or interfere with
the offering of, access to, or the use of any lawful content,
application, or service'' will open the door to a constant stream of
complaints from cable's competitors dissatisfied with the terms of
proposed business arrangements and seeking to use government
involvement as leverage in their negotiations with cable companies.
Nearly every commercial arrangement between facilities-based
Internet service providers and Internet content providers could be
challenged as ``impairing'' access to competing content, effectively
precluding cable operators from enhancing the value of their Internet
access service. Hearing and resolving complaints would tie up scarce
government resources and impose substantial uncertainty in the industry
at the time when it needs regulatory stability to develop this new
business.
If the requirement that providers allow subscribers to ``connect
and use devices of their choosing in connection with BITS'' is
retained, the bill should clarify that the subscribers' right is
limited to, for example, the right to connect any device to the cable
modem and does not allow uncertified cable modems or other uncertified
devices to be connected directly to the cable network. Manufacturers of
devices that connect to a cable modem must bear a reasonable
responsibility to ensure that their equipment evolves and is compatible
with new network technologies such as VOIP. Networks cannot and should
not be required to evolve--or hold back on use of a new technology--to
suit the specifications of individual equipment manufacturers.
The discussion draft could also be read to impose new and
unnecessary interconnection obligations on any cable operator that
offers cable modem service, requiring them to agree to interconnection
demands from telecommunications carriers and private (BIT) networks, as
well as other BITS providers. Without any government mandate, cable
operators have entered into peering arrangements to enable their cable
modem customers to reach any site or person on the Internet. There is
no need to turn this market-driven practice into a government mandate
or to require cable operators to interconnect their broadband
facilities to every other network.
The Bill Lacks Adequate Safeguards Against the Exercise of Market Power
While overregulatory in certain regards, in other respects the
discussion draft omits critical safeguards. In particular, the bill
eliminates many of the regulations that were instituted specifically
because competition proved insufficient to protect against the unfair
exercise of market power, even where market conditions have not yet
changed in a manner that would justify a change in law. For example:
The bill does not require incumbent carriers that control Internet
backbone facilities to provide access to those facilities on a
just, reasonable and nondiscriminatory basis. Telephone
companies that both control Internet backbone facilities and
offer retail Internet access in competition with cable
operators have the incentive and the ability to discriminate
against cable operators in the rates, terms, and conditions
under which Internet backbone service is provided.
The bill does not ensure that VoIP providers can interconnect with an
ILEC at any technically feasible point.
The bill does not ensure that VOIP subscribers' listings will be
included in the ILEC directories (including those of
independent telephone companies as well as the Bells).
The bill lacks clear standards for facilities-based VoIP providers to
interconnect with ILECs or provide any meaningful government
oversight of these interconnection negotiations. ILECs will
continue to provide service to the vast majority of households
for the foreseeable future. Without standards and a supervisory
mechanism in place, ILECs will have every incentive to delay or
impede negotiations for the exchange of traffic with VOIP
providers. The elimination of oversight by the FCC or State
Commission heightens this danger even further.
The bill does not guarantee VOIP service providers' right of access
to pole attachments at nondiscriminatory rates, terms and
conditions.
Nor does the bill provide for effective enforcement of the
prohibition on redlining practices by BVS providers, despite
indications that some competitors seeking to enter the market intend to
deploy service based on the income of area residents. By placing the
obligation on the FCC to oversee and resolve every allegation of local
redlining by a broadband video service provider in every municipality
in the country, the bill effectively frees BVS providers of any
oversight, since the FCC clearly is not equipped with staff or
resources to undertake such a role. Complaints would not be resolved in
a timely manner, allowing the provider ample opportunity to benefit
significantly from its discriminatory policies. Further weakening the
prohibition is the fact that the bill allows providers to self-define
their own service areas, allowing them to cherry pick wealthy
communities for their service rollout.
We urge the Subcommittee to consider the important role that local
governments can play in overseeing the deployment of multichannel video
systems. While the discussion draft preserves local authority over
rights-of-way, local governments should also be able to ensure that all
of their citizens receive service in a timely and fair fashion, that
services meet community needs, and that customer service standards are
met.
As a Whole, the Bill Creates Substantial Regulatory Uncertainty
The sheer scope of the discussion draft and the undefined nature of
many of its core provisions mean that, if enacted, it will inevitably
result in protracted legal battles, significantly diminishing the
likelihood that the bill will succeed in its goal of successfully
moving communications policy into the Internet era. In many aspects,
the bill actually appears to be a step backwards.
For example, as noted above, the bill seems to overrule both Brand
X and the FCC's recent DSL order by subjecting BITS providers to a
forced access requirement. The cable and Internet access industries
have only just finished years of litigating this issue. Likewise, the
telecommunications industry has just finished years of litigating the
UNE and interconnection provisions of the 1996 Act. Communications
companies cannot focus resources and efforts on developing new services
and technologies when the regulatory bar keeps changing. They cannot
face ten more years of litigation. Any rewrite must make it the highest
priority to provide clear guidance and regulatory stability, so that
all industry members may take the necessary steps to bringing new
offerings to consumers.
Thank you again for the opportunity to appear before you today. The
cable industry stands ready to work with you and your colleagues to
craft revisions to the Communications Act that reflect today's
realities and tomorrow's developments. I look forward to your
questions.
Mr. Upton. Mr. Yager?
STATEMENT OF JAMES YAGER
Mr. Yager. Thank you, Mr. Chairman, Mr. Markey, and members
of the subcommittee. I am here today on behalf of the National
Association of Broadcasters, and as the owner and operator of 5
mid-sized television stations in markets like Flint, Michigan;
Quincy, Illinois; Columbia-Jefferson City, Missouri; and
Amarillo, Texas.
Television broadcasters believe that technology and
business models being discussed today will inject much needed
competition into the multi-channel video marketplace. Enhanced
competition will give broadcasters new platforms for
distributing their local programming. That is good for our
viewers and good for your constituents. It gives them more
options. So we support the committee's effort to spur
competition.
However, as the committee moves forward, we urge you to be
mindful of your long standing goal of promoting localism by
preserving a vibrant system of free over-the-air local
television. I don't think anybody disagrees, local television
is part of the very fabric of communities across this country.
Viewers rely on our stations for local news, sports, weather
and political coverage. Before, during and after disasters,
over-the-air television provides a lifeline of emergency
information. So as Congress develops the ground rules for IP
video, the policies that promote localism today should also
govern the relationship between broadcasters and video over
broadband providers. When Congress enacted the 1992 Act, it was
concerned that video distributors have an incentive to delete,
reposition, or even refuse to carry local stations. Congress
also acknowledged that a vibrant over-the-air system requires
access to cable households. With these concerns in mind,
Congress crafted the current must-carry retransmission consent
system.
This two-sided coin has strengthened localism. The must-
carry rules guarantee that even the smallest station in the
most remote market is not blocked out of cable households. The
flip side of the coin is retransmission consent. It recognized
that cable operators derived great benefits from local
broadcast programming. So the 1992 Act gives stations the
option to negotiate carriage terms with cable operators.
Together, the retransmission consent and must-carry laws have
been a win-win for both viewers and for local television. It
therefore makes sense that must-carry and retransmission
consent should be applied equally to video broadband providers.
Other rules are important to localism and also must be
preserved. Congress has long recognized network affiliate
stations rights to be the exclusive provider of network
programming in their markets. Congress and the Commission have
acknowledged the importance of stations' exclusivity for
syndicated programs. Local advertisements sold by stations
during network programming, like 60 Minutes, or Lost, and
during syndicated programming like Oprah Winfrey, fund local
programming, and local news, and local weather, and local
sports.
Mr. Chairman, as NAB testified in April, Congress developed
this framework to ensure that cities as large as New York and
as small as Marquette, Michigan, can have their own unique
broadcast voices. Unfortunately, the staff draft would put
these principles in continual jeopardy by requiring that rules
be reviewed unnecessarily and potentially rolled back every 4
years. Why do laws like must-carry that Congress enacted in
1992, that have been reaffirmed not once, but twice, by the
Supreme Court, and that have benefited millions of viewers,
suddenly need to be defended every 4 years? This will only
inject uncertainty into the market and unduly harm viewers.
The notion that the FCC might repeal retransmission consent
while leaving in place the cable compulsory license is
particularly troublesome to broadcasters. Absent retransmission
consent, a video transmission would simply take a broadcast
signal and profit from it. Meanwhile, the government would set
the rate by which the broadcaster is compensated, and the
station would never have the opportunity to negotiate its
carriage terms. Under the staff draft, broadcasters would face
this specter every 4 years.
Setting aside the 4 year review process, the staff draft
has other shortcomings. Many of the ground rules that apply to
cable, like must-carry and retransmission consent, are in
statutory form. The staff draft orders the FCC to create
supposedly parallel rules for the new broadband services, but a
statute is a statute and a regulation is a regulation, and we
all know statutes are much stronger than regulations. They
provide certainty. What is in statute for cable should also be
in statutory form for the new video distributors.
Mr. Chairman, our industry and your constituents stand to
gain much through enhanced competition in the video
distribution market. We are ready to work with the committee in
achieving that goal, while simultaneously strengthening
America's system of free local over-the-air television. Thank
you.
[The prepared statement of James Yager follows:]
Prepared Statement of James Yager, Chief Executive Officer, Barrington
Broadcasting Company
Thank you, Mr. Chairman, for the opportunity to appear before the
Subcommittee on Telecommunications and the Internet today. I am James
Yager, Chief Executive Officer of Barrington Broadcasting Co.,
testifying on behalf of the National Association of Broadcasters (NAB).
NAB is a nonprofit incorporated association of radio and television
stations and broadcast networks, which serves and represents the
American broadcasting industry.
The television broadcast industry is pleased to be testifying about
the proposed legislation, which is intended to encourage the deployment
of new and innovative Internet services such as broadband video
services. Broadcasters see great promise in what this new video
distribution platform will offer. Broadband video services have the
clear potential to introduce much needed competition into the
multichannel video programming distribution market. We generally see
this as a positive development for consumers, broadcasters and other
program providers.
As we embrace new technologies, however, it is vital that the
legislation adopted continues to recognize the fundamental policy of
localism that underlies our American broadcasting system and the
importance of maintaining a robust system of local, over-the-air
television. Congress, the Federal Communications Commission (FCC) and
the courts have all explicitly recognized that public access to
healthy, free over-the-air broadcasting is an important federal
interest. For this reason, NAB submits that long-standing policies
designed to promote localism, competition and diversity--including
carriage and retransmission consent for local broadcast signals and the
protection of local program exclusivity--must extend equally to all
multichannel platforms. The proposed legislation needs to ensure that
broadband video service providers are subject to requirements in these
areas truly comparable to the requirements already applicable to other
multichannel video programming distributors (MVPDs), such as cable and
satellite operators. As presently drafted, however, the legislation
fails to ensure that these important policies apply to new broadband
service providers in the same manner as they apply to other MVPDs. The
legislation also opens the door to premature elimination of these still
needed national policies. NAB urges that the legislation be amended to
correct these specific, limited problems.
The Deployment of Broadband Video Services Has the Potential to Benefit
Consumers and Programming Providers, Including Broadcasters.
Television broadcasters generally support efforts to speed the
deployment of new and innovative Internet services, including broadband
video services. Particularly in light of continuing consolidation and
increasing national and regional competition in the cable industry,
<SUP>1</SUP> a new video distribution platform offers great promise.
Broadband video services have the clear potential to introduce much
needed competition into the MVPD marketplace. We see this as a positive
development for consumers, broadcasters and other program providers.
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\1\ In June 2004, the four largest cable operators served about 58
percent of all U.S. cable subscribers. Eleventh Annual Report, Annual
Assessment of the Status of Competition in the Market for the Delivery
of Video Programming, 20 FCC Rcd 2755, 2763 (2005) (``Eleventh Annual
Report''). This consolidation will only increase in the future, as
Comcast and Time Warner are acquiring Adelphia's systems.
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Consumers may benefit from the development and deployment of
another, competitive distribution platform capable of bundling a
variety of services, including voice, Internet access and video
services. With regard to video services especially, past studies have
shown that competition from satellite providers has not been effective
in restraining price increases for cable television. For example, the
General Accounting Office (GAO) found that cable rates in markets with
competition from a provider using a wire technology (such as local
telephone company) were about 15 percent lower than cable rates in
similar markets without wire-based competition. Competition from
satellite operators did result in improved quality and service, but did
not result in a significant lowering of cable television
rates.<SUP>2</SUP> The deployment of a new, competitive MVPD service
may also benefit consumers by providing additional, diverse programming
options.
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\2\ GAO, Issues Related to Competition and Subscriber Rates in the
Cable Television Industry, GAO-04-8 at 9-11 (Oct. 2003). In 2004, the
FCC reported, in markets where cable operators faced effective
competition from wireline overbuilders, the average monthly cable rate
and price per channel were, respectively, 15.7 percent and 27.2 percent
lower than those averages for cable operators in communities without
effective competition. Eleventh Annual Report, 20 FCC Rcd at 2773.
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Video programming providers, including broadcasters, may also
benefit from the timely deployment of a new video distribution
platform. The emergence of another platform for the distribution of
video programming will provide programmers with an additional outlet
for reaching viewers and therefore with greater opportunities for
success in the marketplace. Some cable programming networks and
regional sports networks have recently expressed concern to the FCC
that large, consolidated cable operators are increasingly able to
exclude independent programming networks from their systems and, thus,
from the marketplace.<SUP>3</SUP> The rapid deployment of a competitive
video distribution platform could help ameliorate such problems.
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\3\ See, e.g., Petition to Deny of America Channel, LLC, MB Docket
05-192 (filed July 21, 2005); Petition of TCR Sports Broadcasting
Holding, LLP to Impose Conditions Or, in the Alternative, to Deny Parts
of the Proposed Transaction, MB Docket 05-192 (filed July 21, 2005).
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Local television broadcasters may also similarly benefit from the
emergence of another competitive MVPD service. A new video distribution
platform will represent another outlet for broadcast programming,
including local news and information. Given broadcasters' dependence on
advertising revenue (and thus on reaching as many viewers as possible),
the expansion of our opportunities for reaching consumers should be
regarded as positive. The development of another video distribution
platform for carrying broadcast programming would also encourage the
development of innovative digital television programming, including
multicast and high definition (HD) programming. If local stations feel
confident that their HD and multicast programming will be carried by
broadband video providers, broadcasters will be encouraged to make the
substantial investments needed to bring their multicast service plans
to fruition. In the end, it is consumers that will benefit by receiving
a greater variety of programming, including local programming, from
multicasting broadcast stations via a broadband service provider.
Policies Necessary for Preserving Free, Over-the-Air Local Broadcasting
Must Apply in the Same Manner to All MVPDs.
As NAB has testified in the past, our American television system is
an important part of our national identity.<SUP>4</SUP> Unlike other
countries that offer only national television channels, the United
States has succeeded in creating a rich and varied mix of local
television outlets that give individual voices to more than 200
communities. But, local over-the-air TV stations--particularly those in
smaller markets--can survive only by generating advertising revenue
based on local viewership. If new technologies can erode local
viewership by overriding program exclusivity rights of local stations
and offering the same programs on stations imported from other markets,
or effectively block their subscribers' access to local signals, the
viability of local TV stations--and their ability to serve their local
communities with high quality programming--could be lost.
---------------------------------------------------------------------------
\4\ See Attachment, Testimony of Gregory Schmidt, Vice President of
New Development and General Counsel for LIN Television Corporation, on
behalf of NAB, before the House Commerce Committee, April 20, 2005 (NAB
Testimony).
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Over the past decades, Congress and the Federal Communications
Commission have adopted and maintained certain requirements on MVPDs to
preserve localism and local station program exclusivity. These are the
principles that underlie the policies of syndicated exclusivity,
network non-duplication, must-carry and retransmission
consent.<SUP>5</SUP> As Congress has recognized, and the Supreme Court
has upheld, preservation of our system of broadcasting is ``an
important governmental interest.'' <SUP>6</SUP>
---------------------------------------------------------------------------
\5\ See NAB Testimony, pp. 3-10.
\6\ Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622, 662-63
(1994).
---------------------------------------------------------------------------
Earlier this year, NAB explained in other congressional testimony
why must carry, retransmission consent and local program exclusivity
are more necessary than ever to maintain our system of locally-based,
free over-the-air broadcasting and why these policies should be applied
to new technologies such as video over broadband.<SUP>7</SUP> Since
that time, the FCC has again recognized the importance of the
retransmission consent and program exclusivity policies and recommended
to Congress that no changes be made.<SUP>8</SUP> NAB incorporates that
testimony and reemphasizes here today that these long-standing
requirements that apply to traditional MVPDs such as cable and
satellite operators should apply in a comparable manner to new
platforms that provide comparable video services.
---------------------------------------------------------------------------
\7\ NAB Testimony, pp. 2-12.
\8\ Report of the FCC, Retransmission Consent and Exclusivity
Rules: Report to Congress Pursuant to Section 208 of the Satellite Home
Viewer Extension and Reauthorization Act of 2004 (Sept, 8, 2005).
---------------------------------------------------------------------------
The Proposed Legislation Fails to Apply Vital Regulatory Policies
Comparably to Video Broadband Providers and Permits the FCC to
Eliminate Long-Standing Policies Necessary to Preserve Our
System of Broadcasting.
Section 304 of the proposed legislation purports to apply certain
video regulations (including must carry, retransmission consent and
program exclusivity) to broadband video service providers in a manner
comparable to other MVPDs. As drafted, however, the legislation does
not ensure that broadband video providers offering an MVPD service
functionally equivalent to the services currently provided by cable and
satellite operators will in fact be subject to comparable requirements.
As drafted, the legislation prematurely gives the FCC broad discretion
to eliminate, with regard to video broadband providers, long-standing
policies necessary to preserve our system of free, locally-based over-
the-air broadcasting. It also may unintentionally grant authority to
the FCC to undercut current statutory requirements on cable and
satellite providers.
As an initial matter, NAB notes that Section 304(a)(1) of the
legislation directs the FCC to ``adopt for broadband video service
providers comparable regulations as apply to'' MVPDs in a variety of
areas, including must carry and retransmission consent. This language
would create a disparity in that certain requirements (such as must
carry and retransmission consent) will only be regulatory requirements
for video broadband service providers, while these are statutory
obligations for cable operators.<SUP>9</SUP> Regulatory requirements
are clearly not comparable to statutory requirements. It could be
argued that the FCC could waive such a regulatory requirement, while it
may not, of course, waive any statutory requirement adopted by
Congress. Thus, the FCC could possibly waive important policies such as
must carry on the request of a video broadband provider without
appropriate Congressional input, while Congressional action is clearly
necessary to alter such requirements for a cable operator. This cannot
be deemed to constitute ``comparable'' regulation. To correct this
inconsistency in regulatory treatment, the legislation should make
statutory for broadband video providers any requirement that is
statutory for other MVPDs.
---------------------------------------------------------------------------
\9\ See 47 U.S.C. 325, 534, 535.
---------------------------------------------------------------------------
Another provision of the draft legislation is even more troubling.
Section 304(a)(2) permits the FCC to eliminate any of the regulations
applicable to broadband service providers (including must carry and
related policies) adopted pursuant to Section 304(a)(1) of the
legislation.<SUP>10</SUP> This provision will give the FCC virtually
unfettered authority to overturn policies that Congress has previously
determined to be essential for preserving the benefits of free, over-
the-air local broadcasting (especially for those who do not subscribe
to an MVPD); for promoting widespread dissemination of information from
a multiplicity of sources (particularly sources, such as broadcasters,
not under the control of cable operators); and for promoting fair
competition in the market for television programming.<SUP>11</SUP>
While competition may eventually be sufficient to warrant some
deregulatory modifications, it is not so evidently on the horizon that
Congress should hand over its oversight of these important obligations
to the FCC. To prevent the FCC from exercising this amount of undue
discretion, the ``quadrennial review'' requirement in Section 304(a)(2)
should be eliminated from the legislation.<SUP>12</SUP>
---------------------------------------------------------------------------
\10\ Specifically, Section 304(a)(2) requires the FCC to review
these regulations applicable to video broadband providers every four
years and directs the FCC to eliminate those regulations to the extent
the FCC determines they are no longer necessary as the result of
economic competition.
\11\ See Turner, 512 U.S. at 662-63 (finding that Congress adopted
must carry to serve these three important governmental interests).
\12\ NAB also notes that, in other contexts, quadrennial review
requirements have not lead as expected to the elimination of
regulations made unnecessary by increased competition, but has instead
lead to extensive legal challenges of FCC actions and almost permanent
legal uncertainty for communication service providers. For example, the
FCC attempted, as statutorily required, to review the broadcast
multiple ownership rules in 2002, but its revised rules were challenged
in court. Most of these revised rules have consequently not gone into
effect, but have been sent back to the FCC for further consideration
and explanation. The FCC has not yet even begun this consideration of
its 2002 review on remand, but is required by statute to conduct a new
quadrennial review in 2006. There is no reason to believe that a
quadrennial review process in the context of broadband service
providers would operate any more efficiently or effectively.
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In addition, this legislation may unintentionally allow the FCC in
the future to eliminate requirements such as must carry, retransmission
consent and local program exclusivity even with regard to other MVPDs,
such as cable operators. As cable operators continue to upgrade their
facilities so they can offer broadband Internet services, two-way
services and/or interactive services, they may arguably fall under the
definition of a ``broadband video service provider'' in Section 2(a).
In such case, Section 304(a)(2), which permits the FCC to eliminate
regulations adopted for broadband video service providers, would
potentially allow the FCC to eliminate the long-standing requirements
regarding must carry, retransmission consent and program exclusivity
even for those providers traditionally regarded as cable operators.
This loophole could therefore undercut express statutory requirements
for must carry and retransmission consent that Congress adopted for
cable operators in 1992 in order to preserve our system of free,
locally-based television broadcasting. The legislation should be
amended so that cable operators cannot simply recategorize themselves
as broadband video service providers and thereby do an end run around
long-standing policies that Congress and the Supreme Court have
recognized as important.
Conclusion.
Broadcasters see great potential in the development of broadband
video services to increase competition in the MVPD marketplace, thereby
benefiting consumers, broadcasters and other program providers.
However, in seeking to encourage the more rapid deployment of broadband
video services, Congress should extend to this new multichannel
platform long-standing policies that have successfully promoted
competition and diversity in the video market for many years. As
presently drafted, the proposed legislation fails to apply policies
vital for the preservation of locally-based, free over-the-air
broadcasting (including carriage and retransmission consent for local
broadcast signals and local program exclusivity) to new broadband
service providers in the same manner as they apply to other MVPDs. The
legislation even permits the FCC unduly broad discretion to eliminate
must carry and related policies that Congress has long believed were
needed to maintain our system of television broadcasting. NAB urges the
Subcommittee to amend this legislation to correct these specific,
limited problems.
Mr. Upton. Mr. Yager, I know you have been here before,
which is why you were right on 5 minutes. It was perfect.
Mr. Yager. Thank you, sir.
Mr. Upton. Thank you. At this point, we are going to do
questions from the panel. Again, I am going to be--try to be
pretty honest with this--yes. Ms. Praisner, I know that there
is not a copy of the draft, I don't think, in front of you----
Ms. Praisner. There is.
Mr. Upton. Oh, there is? Okay.
Ms. Praisner. Yes, sir.
Mr. Upton. Well, I want to talk a little bit about the
franchise fees, which, of course, get passed along to the
consumer on their monthly bills.
Ms. Praisner. Right.
Mr. Upton. If you look at the staff draft on page 30,
beginning at line 14, Section 303d, as in David, it says this,
``franchise fee assessment by local franchising authority
permitted. The local franchising authority may collect a
franchise fee from a broadband video service provider for the
provision of broadband video service within the local franchise
area of such authority. Amount (2), for any 12-month period,
such franchise fee shall not exceed 5 percent of such broadband
video service providers gross revenues in such period from the
provision of broadband video service to subscribers in such
local franchise area.'' And if you skip down to line 31, line
10, it continues--the draft continues, it says, ``Definition of
Gross Revenues.'' Maybe--I don't know if you have found it.
Ms. Praisner. Page 31.
Mr. Upton. Page 31, now, line 10.
Ms. Praisner. Uh-huh.
Mr. Upton. It says, ``For purposes of this subsection, the
term gross revenues means all consideration of any kind or
nature, including, without limitation, cash, credits,
property''--means a lot--``in-kind contributions (services or
goods) collected from the subscriber and attributable to the
video programming package provided by the broadband video
service provider as part of the broadband video service in such
local franchising area.'' Now, based on what I just read, yes
or no, would you acknowledge that the staff draft preserves by
its very term the local franchising authority to collect 5
percent of gross revenues collected from the subscriber that is
attributable to the video programming package part of the
broadband video service offering? Does it not say that? Yes or
no.
Ms. Praisner. It says that for the piece that it allows us
to collect, but it does not allow that 5 percent to extend to
all of the areas in which, under the cable franchises that we
have now, there is the capacity to collect. So there isn't the
advertising fees, the Home Shopping Network fees, whatever
those----
Mr. Upton. Property, in-kind contributions, cash, credit,
et cetera. Let me talk about the PEG issue for a second.
Ms. Praisner. Okay.
Mr. Upton. Again, I would like you to read along with me,
since you have got it there, from the text. On page 34,
beginning at line 21, it talks about PEG, Public, Educational,
Governmental use. ``Local franchising authority may designate
broadband video service provider capacity for public,
educational or governmental use in the local franchising area
so long as such use is comparable to the obligations the local
franchising authority applies, (1) to any cable operator in
such local franchising area, and (2) in any other broadband
video service provider in such areas.'' So, again, yes or no,
based on what I just read, would you at least acknowledge that
the draft does, by its very terms, permits a local franchise
authority to designate capacity for PEG from a broadband video
service provider which is comparable to that which a cable
operator in the local franchise area is also providing?
Ms. Praisner. Yes, it----
Mr. Upton. Okay.
Ms. Praisner. [continuing] provides for PEG channels.
Mr. Upton. Finally, I would like to talk a little bit about
the rights-of-way management. Once again, if you read on page
61----
Ms. Praisner. Uh-huh.
Mr. Upton. [continuing] starting at line 11, it says this,
``Use of rights-of-way and easements: in using public rights-
of-way and easements that have been dedicated to compatible
uses, a BITS provider, a VoIP service provider, or a broadband
video service provider, shall ensure that, (1) safety,
functioning and appearance of the property and the convenience
and safety of other persons not be adversely affected by the
installation or construction of facilities necessary for such
service. (2) The cost of installation, construction, operation,
relocation or removal of such facilities be borne by such
provider or subscriber to such provider's service, or a
combination of both, and (3) the owner of the property shall be
justly compensated for any damages caused by the installation,
construction, operation, relocation, removal of such facilities
by such provider. (B) Preservation of Authority. No provision
of this title shall be construed to prohibit a local franchise
authority already--or other unit of the State or local
government--from (1) enforcing the requirements of paragraphs
1, 2, and 3, (2) from imposing reasonable restrictions, and on
time, place or manner by which provider constructs, alters, or
maintains facilities that use public rights-of-way and
easements.'' Question, again yes or no, based on what I read,
would you acknowledge again that this staff draft does by its
very terms preserves the local franchises' authority right to
control the use of rights-of-way, including as it relates to
safety, functioning and the boiler plate language that has been
there before?
Ms. Praisner. I am sorry, Mr. Chairman.
Mr. Upton. Does it not?
Ms. Praisner. On that issue, I have to say no. I do not
believe----
Mr. Upton. Well----
Ms. Praisner. [continuing] and perhaps it is a
clarification of language that is necessary. And, again, we
would be more than willing, as I indicated, to discuss this.
But, if you look on lines 15 and 16----
Mr. Upton. Okay.
Ms. Praisner. [continuing] it says, as we read this--and as
I say, it may be that the language needs to be tweaked, and we
are happy to talk with you, but it says the video service
provider shall ensure. It seems to me that that leaves an
impression that the determination of what is safety,
functioning and appearance, et cetera----
Mr. Upton. But it----
Ms. Praisner. [continuing] but----
Mr. Upton. My time is expiring, but especially we added
this provision that says that the local franchise authority, or
other unit--it does--``no provision shall be construed to
prohibit a local franchising authority, or other unit, from
enforcing requirements'' of that paragraph of subsection A.
Ms. Praisner. Well----
Mr. Upton. So----
Ms. Praisner. [continuing] again, sir, it----
Mr. Upton. Look----
Ms. Praisner. [continuing] maybe we need to work together
on tweaking the language. That is not the----
Mr. Upton. I look forward----
Ms. Praisner. [continuing] way we read it.
Mr. Upton. I look forward to doing that. I yield now. My
time is expired. I got to be the--it is 6:30? No. Yes. It says
5. I have got another 5 minutes. I didn't touch it. Someone
else did. I would recognize Mr. Markey.
Mr. Markey. That I am destroying the evidence.
Mr. Upton. Yes.
Mr. Markey. Mr. Yager, in the bipartisan consensus draft,
broadcasters were essentially held harmless. I worked hard with
Mr. Dingell to ensure a balanced level playing field between
the cable and Bell companies. The Barton-Upton draft upsets
that balanced approach. From the broadcast perspective, this is
obviously a step backward, and you would like to see those
provisions restored to the previous consensus position that
obligations for both wireline video competitors should be the
same. Is that correct? And could you expand, please?
Mr. Yager. Okay. That is correct. We believe in a level
playing field for all----
Mr. Yager. We believe in a level playing field for all
video service providers. We are sure that that will ensure the
public of a free choice of local television for both your
constituents and our viewers.
Mr. Markey. Would you prefer the language in the first
staff draft?
Mr. Yager. I will have to say I am not familiar with the
language in the first staff draft, but as you described it, I
would prefer that language over the other language----
Mr. Markey. Okay. Thank you.
Mr. Yager. [continuing] that you described.
Mr. Markey. Okay. Thank you, Mr. Yager. Mr. Ellis, SBC's
CEO was quoted recently in Business Week. I would like to give
you an opportunity to contradict your boss on how SBC will
treat access to the Internet and Internet content. But I want
you to do so in the context of a statement in your testimony
which says, and I quote, ``the video service will communicate
with other IP-based services. Customers will be able to display
on the TV secure, customized Internet content.'' My question is
will this Internet content be of the consumers' choosing or
SBC's choosing?
Mr. Ellis. I appreciate the opportunity to contradict the
chairman of my company, but I am not going to do that. To
answer your question, the SBC has been very clear in many
forms, including before this committee, that we will not block
access that we provide to the Internet based on the content
received over that access. So that is point No. 1. And point
No. 2, with respect to the provision of services over our
broadband facilities, the customer is going to have the option
to utilize the facilities to access the content of their
choosing. Now, I don't know how much clearer I can be about
that.
Mr. Markey. Yes. Will that be all Internet content?
Mr. Ellis. Will it be all what?
Mr. Markey. All Internet content.
Mr. Ellis. All? If you are sitting in one of our houses
that is served by our broadband facilities and you are at your
computer, you can access whatever content tomorrow that you can
today. There is no----
Mr. Markey. Through the TV?
Mr. Ellis. Through the TV application will depend on the
development of that capability, but we will fully expect that
you will sit at your TV and you will have the capability, if
you want, to watch half your screen being the video that comes
out and the other half the screen, if you want to surf the web.
Mr. Markey. Okay. So the question, again, keeps coming back
to who will choose.
Mr. Ellis. The customer will choose which they want. But
maybe what this gets to--and let me be very straightforward and
candid about it--the provision of the video service that we
propose to offer in competition with cable will not utilize the
public Internet for a number of reasons. We cannot get the
content providers, the video providers, the movie providers to
agree to let us use the public Internet for distribution of
their programming. There is privacy reasons; there is delay
reasons; there is quality reasons; there is pop-up ads that
come. So the video content will not access the public Internet.
Mr. Markey. Okay. So if we drafted language and inserted it
into the bill that said that Internet content will be within
the exclusive control of the consumers' choice, would you
support that language in legislative form?
Mr. Ellis. I would. I might need to see it in context,
but----
Mr. Markey. Well, that is the question I have been asking
you for 3 minutes, but the context is what you are about to do.
Mr. Ellis. Let me say it this way: today, if you are our
customer for Internet-access service, you have the choice----
Mr. Markey. Would you support----
Mr. Ellis. [continuing] to access whatever----
Mr. Markey. Would you support that language being written
into legislative form that the consumer is king and that the
consumer has the choice of going to any Internet content that
they want, unimpeded by SBC. Would you support that language?
Mr. Ellis. Yes, in principle, I do. I want to see the
language, because I want to be very clear that they have that
capability today; they will have it tomorrow. I have no
objection to that.
Mr. Markey. Okay. I hope we have a second round. I thank
the----
Mr. Upton. I don't know that we are going to do a second
one, you may do questions in writing, because we have got
another long panel after this. I broke the Markey rule by going
to two panels, but you came up with this list of witnesses that
I wanted to accommodate you on, sir.
Mr. Markey. I was afraid it was the last hearing we were
ever going to----
Mr. Upton. And you are probably----
Mr. Markey. [continuing] have on the----
Mr. Upton. [continuing] right.
Mr. Markey. And I didn't want to----
Mr. Upton. You probably had lunch and then you came back.
Anyway----
Mr. Markey. Well, three companies are in the private room,
and then I wanted to give everyone else a shot here.
Mr. Upton. Mr. Barton?
Mr. Barton. Thank you, Mr. Chairman, and thank you folks
for being here, and thank you for letting us go vote and come
back, and I know that wasn't easy. Let us assume that your
choices on Federal telecommunication policy changes boil down
to draft one and draft two, and that is the only choice you
get. You can be for the first draft and against the second, or
for the second and against the first, or against both, but you
have got to vote for one of them. How many of you folks would
vote for draft one, the one that we put out in September? Okay.
We have got one, two, three, four, five, six, seven, eight--we
got nine voters in draft one. How many for draft one? Two,
three, two-and-a-half. How many for draft two? Two. How many
for neither draft? So you want us just to throw in the towel
and say we can't do it?
Ms. Praisner. Excuse me, sir, if I might comment. I don't
think so at all. I think you have the parties' attention, and
you have all of us at the table, and I think there was
significant work as we worked through our staff. Some local
government spent 12 hours with your staff--I think they told
me. At least that is what they told me--in discussing of this
one.
Mr. Barton. Well the----
Ms. Praisner. So my point is, of the two, if that is my
choice, this one is more preferable. Do we have work to do on
both? I believe we do, and we are ready, local governments are
ready. We have already indicated that. We are ready to work
with you collaboratively, bipartisanly, however you phrase it,
we are ready.
Mr. Barton. Well, on draft 1, we got no positive comments.
None. Cities didn't say they liked it. Microsoft didn't say
they liked it. The Bells didn't like it. The ILECs didn't like
it. We got none. So I am glad to know now that you have seen
draft two, some of you like draft one. I guess in a way that is
progress.
Ms. Praisner. May I comment, sir?
Mr. Barton. But we have gotten a lot of positive comments
on draft two. I am a little surprised I didn't see more hands
go up for draft two, but maybe you all think it is a trick
question.
Ms. Praisner. May I comment, sir?
Mr. Barton. Well, I want to ask my folks down there on the
end from Southwestern Bell, I want to ask you a question that
is kind of similar to the Markey question. The reason we made
the change from draft one to draft two on Internet
accessibility is that our content providers all told us that if
we didn't make some sort of a change, the content providers
were going to be susceptible to Internet viruses, and that the
content providers wouldn't provide content. Now, I promised Mr.
Markey and Mr. Dingell that we wanted to have total access in
this new era. In all these new services, we wanted to have
access to them, but we took to heart, at least I did, that we
didn't want to open up to the providers of the content that
their systems could get infected with these viruses. So the
tradeoff that we attempted to make was that you could protect--
if you were a provider of video services or data services, or
whatever it was that you were providing, that you could protect
that, but that there would be an icon on the computer, on the
television screen, wherever it is that the consumer was
accessing it, that when they wanted to click over to the
Internet, they had to click one time, whatever the icon that--
Southwestern Bell has a different icon than Microsoft or
whatever, but it would be there, and even Joe Barton, as dumb
as I am in high-tech, I could figure out which icon got me to
the Internet, and I could click on it and I would have full
access. Now that is the concept that we tried to put in the
bill. I am going to ask my friend at Southwestern Bell if that
concept, if it is in the bill, gives the content providers the
ability to protect their systems, but it gives the consumer the
ability to do what Mr. Markey said we need to do?
Mr. Ellis. Absolutely. You did it much better than I, but
that is what I was saying.
Mr. Barton. All right. Now, my friend at Microsoft, are you
satisfied with that?
Mr. Mitchell. The way you just described it is certainly
technically capable and would hit the connectivity principles
of net neutrality that we have advocated. So, yes.
Mr. Barton. I mean, that is what we are trying to do. That
is the reason there is a change in the draft. It is not a
change that has been accepted by Mr. Dingell and Mr. Markey. To
their credit, they preferred the original language, and so we
tried to keep the principle but protect the network, and if we
haven't done it, we will keep trying, so that is our principle.
Mr. Mitchell. Yes. I would only comment that I think the
principle is the right principle. I think probably everyone at
the table would agree at some level the language does need some
tweaking as to how that actually works so that it is as clear
as you have articulated.
Mr. Barton. Okay. My time has expired. Thank you, Mr.
Chairman.
Mr. Upton. Mr. Stupak?
Mr. Stupak. Thank you, Mr. Chairman. I thank you to the
panel for being here. It was a lengthy panel and you sat
through all the openings and glad to have you here today, and
hopefully we can get this bill moving in more of a working
together tone. Let me ask about this one, though. In the
transition from traditional titles to the new BITS titles, it
is not clear to me in this draft how providers make the
transition from existing regulatory regimes to the new titles
under this draft. For example, what if a cable operator has
some customers under a Title I cable--I am sorry, a Title VI
cable franchise, but also offers new services that qualify
under the broadband video service definition. Is that provider
required to get two franchise? Mr. Rehberger, do you want to
hit that one? Would I be required to get two franchise?
Mr. Rehberger. I think you hit upon one of the things that,
not only I, but a couple of the other folks on this panel have
talked about today. It makes no sense from a technology point
of view the way we see it. I guess we would be a BITS provider
today, because we provide Internet----
Mr. Stupak. Right.
Mr. Rehberger. [continuing] we provide VoIP-type
technology. We are underlying providers to many of the VoIP
providers that have been mentioned. So, clearly, we wouldn't
understand what we fell under. If we provided a bundle of
Internet access and voice services over a single T1 access
line, would then--and that T1 access line happened to be under
uni-pricing, is that uni-pricing or is the uni-pricing gone
because now we are a BITS provider----
Mr. Stupak. BITS provider.
Mr. Rehberger. [continuing] and, you know, we don't get
uni-pricing under the BITS regime the way we see it. So it
clearly is not something that we understand, and we don't
understand why the staff believes there has to be a, you know,
a division of the technology. What if the next technology comes
out that----
Mr. Stupak. Sure.
Mr. Rehberger. [continuing] is somewhat different than
VoIP, different than the packet-switch network, are we going to
go ahead and develop another regulation for that? I think it
goes back to what I heard here on my left which is the service
that we are offering, it is not the underlying technology.
Mr. Stupak. Okay. Well, let me ask you this then: I have
heard from some of my smaller companies that their ability to
interconnect will be weakened under this draft, do you see
that?
Mr. Rehberger. Yes, I do. I mean, if you go back--not to
cite out of the bill, but if you go back and look at the access
and co-location rights, it says those access and co-location
rights for the purpose of providing telecommunication service,
which again, maybe it is a clarification, but to that language,
it says to us those rights wouldn't exist under providing BITS
service, even though they exist under telecommunication
service. We think that, you know, what this does is provide the
ILECs themselves a way to essentially eliminate the uni-
structure, which everyone forgets was a compromise in, you
know, the 1996 Act, around having everyone getting their long-
distance, and so that is what we think this does. It may not be
the biggest piece of the bill as we talk about the video, but
it is a very, very important bill to us. And if I could add one
more point, it is that the idea that this is less regulatory
than where we are today, I just don't see it. It is another set
of regulations on top of the 1996 Act.
Mr. Stupak. In my opening, I mentioned quite a bit about
the Universal Service Fund because we you rely upon it in
northern Michigan and throughout rural America. Do you support
broadening the contribution base for Universal Service Fund? Do
you support allowing Universal Service Fund be used for
deployment of broadband? Anyone want to comment on that? Ms.
Praisner? You would support that obviously as a municipality
because----
Ms. Praisner. Yes.
Mr. Stupak. All right. Anyone else care to comment on that?
Mr. Rehberger. I would. We would support broadening the
base on Universal Service Fund.
Mr. Stupak. Well, let me ask you this then. In the first
draft, we had the, you know, questions of how are you going to
fund USF. Are you willing to live with a franchise fee
agreement in your first draft which basically was based on a
definition of gross revenues that included advertising, video-
on-demand and other revenue associated with the video offering?
Anyone want to comment on that? Care to touch that? Mr. Ellis,
SBC, you were talking a little bit about that today.
Mr. Stupak. Would you support that in the first draft as--
--
Mr. Ellis. No, we are not okay with the first draft. We
would prefer, obviously, the second draft that ties the 5
percent to revenues derived from the provision of the video
services.
Mr. Stupak. How would you fund the Universal Service Fund?
Mr. Ellis. The Universal Service Fund, we don't have a
problem with expanding it, so long as it is done in a
competitively neutral way.
Mr. Stupak. Thank you, Mr. Chairman.
Mr. Upton. Mr. Whitfield?
Mr. Whitfield. Thank you, Mr. Chairman. And Ms. Praisner in
her statement made the comment that in Texas that Telcos were
given what they wanted with fast-track franchises, and then she
went on to say that Verizon and SBC, months after the law was
put on the books, have offered to provide competitive choice to
less than 1 percent of Texas households. And then she asked the
question, is the Nation giving up the consumer protections and
community benefits and the current franchising system just to
provide choice to 1 percent of the population. And, Mr. Ellis,
I would ask you, how would you respond to that criticism?
Mr. Ellis. Well, I guess with, first, a little bit of
amazement. It has been literally weeks since the legislation
passed. We have filed an application for all of the city of San
Antonio metropolitan area. It incorporates 22 communities. That
is our initial deployment schedule. Within a matter of weeks
from the time the legislation was passed, Verizon went in to
Keller, Texas. It has been talked about. And within days of
Verizon selling its services, the incumbent cable operator
dropped its rates 30 percent and added new features. I think it
speaks volumes for the importance of this kind of legislation
and the practical impact that the legislation can bring about,
not just in Texas, but nationally. We are going to get well
beyond 1 percent, but this is--after 35 years, it has taken the
cable to buildup to essentially their footprint. We are
literally weeks into this process.
Mr. Whitfield. Ms. Praisner, I know that you are certainly
interested in lowering consumer prices, and Mr. Ellis has made
the argument here that with that competition that they have
provided, that in that instance, they did lower consumer
prices. Would you respond to that, or----
Ms. Praisner. Yes, sir.
Mr. Whitfield. [continuing] any kind of----
Ms. Praisner. It is my understanding--and I welcome where
SBC or Verizon may be going, but it is my understanding from
conversations with folks in Texas that the numbers and areas
where they are going are at a low percentage of the overall
population of Texas. They may get there eventually, but not in
this initial time period.
Mr. Whitfield. Okay. I wanted to ask Mr. Willner, whose
company provides a lot of cable service in our area, and I am
certainly not an expert in this issue, but I would like for you
and Mr. Ellis both to respond to this question, Mr. Willner, if
you would help me get a better grasp of this. If cable's VoIP,
or voice over Internet protocols services, should be treated
differently than the Bell's legacy telephone services, why
shouldn't the Bell's broadband video services be treated
differently than cable services? Would you respond to that?
Mr. Willner. Sure. I would submit that, to the extent that
we are competing for broadband services with similar services,
that we should have parody in a deregulatory environment, and
that is--that would be fine with us. And the cable industry has
supported parody in a deregulatory fashion, and we continue to
support that.
Mr. Whitfield. Mr. Ellis?
Mr. Ellis. We would support the treatment of our entry into
the video business on the same terms which cable came into the
telephony business, in other words, without the burdens of the
legacy regulation. And by that, I am specifically meaning
without any of the obligations that surround the obtaining of a
franchise. If we have to go through the franchise process that
exists today in the communities we intend to serve, it will
take us, at the rate of one franchise a week, 40 years, and
that is if we can negotiate with the 2,200 communities, one a
week, which is--that is impossible. It would take 40 years. The
process--it can't work.
Mr. Whitfield. Yes. Well, Mr. Willner, would you be opposed
to some streamlined national system to deal with this
franchising issue?
Mr. Willner. No, I actually disagree with Mr. Ellis. I
think that in order to evaluate the differences between us
entering the telephone business and their entering the video
business, we really have to define the competitive world that
cable operators live in today. I heard earlier a number of
people make some comment that we don't have any competition in
our core business, and I can assure you, Mr. Whitfield, I wake
up every morning thinking about what Dish Network and what
DirectTV is going to do to us that day in Henderson, Kentucky
and everywhere else that we operate, because they are extremely
competitive. And the reason why people confuse the fact that we
are not already in a competitive business is because they use a
different platform. It would be the same thing as suggesting
that Barnes & Nobles brick and mortar shops at the shopping
mall don't feel that they are competing with Amazon.com because
they don't have any bookshelves, but they sell the same books.
We are already in a very competitive field. Going into the
telephone business where there is a legacy network hooking into
where over 80 percent--soon to be probably closer to 90 percent
when these mergers are completed--of the telephone subscribers
are hooked into the existing 100-year-old telephone monopoly
infrastructure. We need certain rules in place in order to
force the Bells, based on historical experience, to
interconnect with us on a fair and economically sound basis for
consumers to have choices. So I think there are some
differences. The differences primarily are we are already
competing with two, and in some cases more, competitors for our
core video business, and there is very little competition in
the phone business. That is where the failure in the previous
acts had been, and that is what we have to work on making sure
it takes root.
Mr. Whitfield. Mr. Ellis, the----
Mr. Ellis. Well, I just--quick couple points. It is pure
fact that cable rates have been unconstrained. Everyone in this
room can tell their own stories, but the facts are up 40
percent in the last 5 years. They are unconstrained by whatever
quote competition exists. The second point I would just make,
that reverse is true in the telecommunications world. The rates
have gone down on virtually every service that all providers
offer. It is a highly competitive market. And the third thing I
would say, if you want to talk about the difference between
cable and telephony, we have an obligation to permit resale of
our service, co-location, unbundling, and there is a whole
laundry list. Cable has a completely closed system, absolutely
closed. They don't require or permit co-location. They don't
require or permit resale, and so on. Completely different
thing. We are not asking to impose on them the legacy
regulations. We are not asking that, never have. All we are
saying is let us have the same rules apply to our entry into
the cable, into the video service business, that they had when
they came into telephony, and that is no legacy regulation
applicable to them.
Mr. Upton. Mr. Boucher?
Mr. Boucher. Thank you very much, Mr. Chairman. I have a
microphone here. I am challenged by technology. In the wake of
the Brand X decision by the Supreme Court which held that cable
modem service is an information service and that unaffiliated
Internet access providers do not have to be accommodated on the
cable modem platform and in the further wake of the FCC's new
rule that applies that same principle to telephone companies
supported broadband platforms, it is now clear that
unaffiliated ISPs do not have to be accommodated on broadband
platforms. And that brings into particular focus the need for a
firm principle of network neutrality that would simply say that
any user of the Internet has the right to access any website of
his choosing and fully enjoy the services provided by that
website without interference by the operator of the broadband
platform. Now broadband platform operators are going to have
some incentive to manage. They, for example, might want to
favor their own content in competition with the context offered
by the unaffiliated content provider. And the principle of
network neutrality is designed to make sure that doesn't
happen, that there is no interference, that there is no
favoring of the broadband operator's content to the
disadvantage of the unaffiliated content provider and to the
disadvantage of the broadband platform's customer. And so I
have a couple of questions about this. Let me say at the
outset, Mr. Ellis, that I acknowledge that when a broadband
operator makes substantial investments in the network and
deploys these facilities at considerable cost, that operator
ought to have the assurance that he can deliver a reliable
product, a high-quality product, whether it is VoIP or video,
or something else, to the customer, and you have a right to
expect that. On the other hand, because you are offering DSL
service, your customer has a right to expect that some part of
the capacity of that broadband platform is going to be devoted
to his Internet access opportunities and that it be a
considerable enough portion of the total capacity that when he
wants to access an unaffiliated video provider, for example,
there is still an opportunity for that signal to come in. And
when he wants to access an unaffiliated VoIP provider, he can
do that as well. And so my first question to you--and I want to
engage also Mr. Mitchell, Mr. Putala and Mr. Krause in this
conversation--but my question to you is do you acknowledge that
basic principle, that you ought to be able to offer your
service at high-quality, but your Internet customer ought to be
able to reach any website and have sufficient capacity on your
pipe in order to enjoy those services?
Mr. Ellis. Absolutely, and just so I am clear, if you
obtain our service, you will have the ability to access the
site of your choice over the public Internet, and we will not
interfere with it in any way, as long as it is lawful content.
I want to make it clear that is to be distinct from the
provision of the video that will be completely segregated, kept
apart from, the public Internet.
Mr. Boucher. Right. I understand that. That is your
business model. What about the capacity that will be available
on your platform for the public Internet access part? How will
that compare to the capacity that you are going to utilize for
your closed video service?
Mr. Ellis. For individual customers, there is ample
capacity that will be out there. That is not an issue. Today,
you get 1.5 Megabits. We strive to provide that depending on
where you are. We will have ample capacity, and if a customer
wants more than 1.5, they want to go to 3, we will sell it to
them. But I make clear to people in my simple way of looking at
this, that there is three parts to this Internet. There is the
part we provide from the house to----
Mr. Boucher. My time is limited, Mr. Ellis. I think you
answered my question. Based on that answer, I assume you would
not disagree with a requirement that you not unreasonably
restrict the amount of capacity that is available for the DSL
service you are going to be selling?
Mr. Ellis. In--our position on this, like so many other
things, that heavy-handed regulation shouldn't be there. It
ought to be commercial terms negotiated with all providers.
Mr. Boucher. All right. I see some heads shaking on the
panel here. Let me engage Mr. Mitchell, Mr. Putala, Mr. Krause,
if you would like to respond to what Mr. Ellis has said and
perhaps address the general assembly.
Mr. Upton. Quickly.
Mr. Krause. Yes, I want to say something very quickly,
which is Mr. Ellis makes an important point, which is there is
a very important distinction between what is delivered on the
public Internet compared to what is a managed service that uses
Internet technology but is in fact more akin to the intranets
that we all access today. So as long as there is a very clear
distinction between the two, and a separation, logical or
physical, between the two, this is critical to the delivery of
the IP video service because otherwise you won't get the
content authored to you from the Hollywood studios.
Mr. Boucher. And it is a capacity issue with regard to the
public side of that, isn't it?
Mr. Krause. Yes, it is. In fact, the public side of the
Internet, the Internet is essentially a best effort service. So
when we say we offer 3 Megabits, the subscriber doesn't
actually get 3 Megabits of sustained bandwidth. They get some
very small percentage of that and it is allowed to peak. That
is what is the Internet. The managed intranet is very different
from that. It is actually a sustained guaranteed bandwidth so
that the service provider can deliver the quality that the
studio requires to deliver the content.
Mr. Boucher. All right. Mr. Mitchell, Mr. Putala, would you
care to comment?
Mr. Mitchell. I would have made the same comment as my
colleague to my right, Mr. Krause.
Mr. Boucher. All right. Mr. Putala?
Mr. Putala. Absent a real commercial incentive, it is real
hard to get to the deal that Mr. Ellis described. What we are
concerned is not so much that they are going to block, but it
is a question of prioritization and what happens within the
guise of prioritization. If Mr. Ellis has got his own video
packets and his own VoIP packets going over his switch, same
customer--SBC customer for VoIP and for video and he always
puts his VoIP packets ahead of his video packets--because that
is what the technology requires--okay. That is fine. But if it
is an EarthLink voice customer, let us make sure there is
language in there to protect the fact that EarthLink customers,
when their VoIP packets cross along on the same pathway, that
they also get jumped ahead of the video packets so it is the
same level of service, just for different customers, and that
would----
Mr. Boucher. If there is adequate capacity on the public
side however, that is not a problem, because over that adequate
capacity, your VoIP service can travel, right?
Mr. Putala. If it is----
Mr. Boucher. As long as it is adequate?
Mr. Putala. As long as it is adequate, it is not a problem.
Mr. Boucher. Okay. So my final question, Mr. Chairman--
thank you for your----
Mr. Upton. Be very quickly.
Mr. Boucher. If I may, would the 3 of you who have just
answered agree that some requirement that adequate capacity be
reserved in these instances for the public side would be
appropriate?
Mr. Upton. Yes or no?
Mr. Mitchell. Yes.
Mr. Ellis. Yes.
Mr. Boucher. Mr. Krause?
Mr. Krause. Yes.
Mr. Boucher. Okay. Thank you. Thank you, Mr. Chairman.
Mr. Upton. Mr. Shimkus? Strike him out. I just--as a
deferral who has no opening statement gets 3 minutes.
Mr. Shimkus. I know. I am going to be--I know everything
that I want to be asked has been asked already. Just give me an
idea, did we--did anyone ask any questions on E911 yet? Okay. I
will just stay on that vein then because you all know that Anna
Eshoo and I worked very diligently with the public responders
in pushing enhanced 911. We all know that there is a concern
about identification/location based upon VoIP. There is an
expectation by the public, and that is an expectation this
committee will want to fulfill. And I know there is, based on
the opening statements which I was present for, I know that
there is some concern technologically about the ability to do
that. But, a statement, and then I will let people respond. I
would just say that I--you can't always speak for all members
of the committee, but I think once we move a process, that the
expectation that someone uses and calls 911 over any medium
will have the expectation that people can know where they are
at. And that is what I hope you all will address, and I will
open it up to anyone who may want to comment on that.
Mr. Putala. Congressman, knowing of your leadership on the
911 topic, we at EarthLink are doing our level best to comply
with all the very abbreviated deadlines that the FCC has asked
us. I think we are at about 94 percent compliance in terms of
letting our customers know. We have done repeated emails to try
and let them know of the capabilities of the service. We are
only going to be marketing the 911 service where the
infrastructure allows it. And that raises an important point
that is addressed in the draft about the central importance of
making sure that there is non-discriminatory access to the 911
infrastructure controlled by SBC and others, and there is an
important omission in the staff draft. I think I understand the
reason, but I would be remiss not to note it, of ensuring the
same kind of regulatory parody, the same kind of liability
parody that has been--I think it was included in your
underlying legislation, and we hope that at the end of the day,
I hope that VoIP providers will have the same thing as
wireless, wireline in terms of the liability protections.
Mr. Shimkus. Anyone else?
Mr. Rehberger. Yes. Congressman, if I may, I agree on the
liability portion of that bill. Very important for us. And
then, second, we are fortunate in that our customers are
businesses and they stay in one place, so we don't have an
issue. Although, we are working very hard with some of the VoIP
providers who we--they use our underlying network to make sure
that they can provide E911 services to their customers.
Mr. Salas. Congressman, I would just add that this
capability will not happen by accident. It will require, I
think, continued focus and development on standards to make
this work I think the way you intend for it to work.
Mr. Shimkus. Well, and we just got a great organization
grouping caucus with both members on bipartisan members in the
House and Senate, of course, and in the industry working well
together that and we want to applaud that. Yes, ma'am, you
wanted to say something?
Ms. Praisner. Yes, sir. Thank you. I wanted to share that
from my perspective and from the local government officials,
obviously this is a critical issue as well, having our
constituents and our consumers know that when they make that
911 call, it connects with the right place. My--some of the
colleagues who have reviewed the legislation have raised some
concerns about the fact that the legislation does not include
an EASS video requirement for 911 so we obviously would want to
work and look at that issue.
Mr. Mitchell. The only comment that I would make is just to
note that there are distinctions in different types of VoIP
services as I noted earlier, and to make certain that we don't
end up with something where click-to-calls for Xbox Live or
similar kinds of uses of the technology somehow become burdened
by E911 and similar obligations.
Mr. Shimkus. Mr. Chairman, with that I want to thank the
panel. I know they have been long-suffering and I appreciate
them being here, and I yield back.
Mr. Upton. Mr. Inslee?
Mr. Inslee. Thank you. Mr. Ellis, I wanted to ask you
about--Mr. Boucher's last question was a question of,
basically, should there be a maintenance of some minimal level
of public access--access to the public Internet over these
pipes, and the other folks answered yes, and your comments, as
I understood them, were helpful in that regard. And that is why
I appreciate you being here today to expound on them. But, if
you could really clarify a little bit what you see where your
vision is in that regard, providing consumers with level or
levels of access to public Internet. You made a reference that
if there was a larger amount available, you would sell it to
them, I presume, for a higher price. I guess the question is I
have, do you envision some regulatory or statutory minimal
level of access to the public Internet over your pipes, and if
there is a minimal level, do you envision tiers where you would
sell for additional cost this additional level of service as
far as just--I don't know--the pipe you take up.
Mr. Ellis. I guess my personal vision of how this service--
our service will work is like this. We will provide, using
these facilities, a video alternative--that is one piece the
facility will use for that. In addition, we will provide to our
customers the same thing we have today, that is the capability
to access the public Internet and the content of their
choosing. That is how I envision this going forward. I think as
a practical matter, a level of 1.5 Megabits that we offer today
with DSL, there will be many, many people who will want more,
and we will offer that. Will there be an additional charge?
Sure. The more bandwidth they want, the more the charge. But I
would--the point I tried to make earlier, your focus--and the
focus is on one-third, the point from the house to the
backbone. Then there is the backbone, and there are 17 or 18
backbones and it goes all over the world. And then there is the
downside. We control and offer one-third of that. We assure
quality 1.5 Megabit, or try to. But what happens on the rest of
that Internet, the lowest common denominator is the flow-
through that a person gets, and the dissatisfaction, I submit,
that is going to grow as more applications, more sophisticated,
is not going to be solved by focusing on one-third. It is going
to be the other two-thirds as well. I don't know if that helps,
but that is where my personal view of the focus of the future
and where everybody is going to have to invest in the
infrastructure. Not just the ILECs, not just the cable people,
but--the applications providers, to make sure that entire flow-
through gives the kind of quality that will support the kind of
applications that are out there.
Mr. Inslee. And what effects of this bill would you
encourage to look at in that regard to encourage those
investments on the other part?
Mr. Ellis. I am--as I said, there are probably things if I
had written this bill or draft, I would have done differently,
but we are happy with the bill in its present form.
Mr. Inslee. Thank you. Mr. Mitchell, I wanted to ask you,
just continuing talking about net neutrality, do you think
there are any providers of broadband Internet access that
should be exempted from net neutrality, or should this be a
universal principle?
Mr. Mitchell. I think we have been pretty clear that we
view the net neutrality as pretty much a universal principle
for providing Internet access to consumers across the board.
You know, with--that has been the basis of the Internet success
today. In fact, I think Vint Cerf today, the father of the
Internet as perhaps we know it, is receiving a Presidential
Medal as a result of, you know, getting us to this point. These
principles of being able to go anywhere and use whatever
content, clearly within the limits of the capabilities of the
devices you have--my phone doesn't do as well as my PC on the
Internet--but that is a universal principle that should be
applied.
Mr. Inslee. Thank you. Thanks, Chairman. Yield back.
Mr. Upton. Yes, before we yield to Ms. Blackburn, I just
want to make two unanimous consent requests. One from Mr.
Ferguson to put in a statement from ADC Telecommunications and
one from Mr. Markey to enter in a Vint Cerf, founding father of
the Internet--I thought that was Al Gore. Put a letter in from
him as well. Without objection?
Mr. Markey. Mr. Chairman, could I briefly be recognized,
and because Mr. Mitchell made reference to Vint Cerf, and he is
receiving the Medal of Freedom today, and his letter to us, as
Mr. Mitchell said, says to us today, ``My fear is that as
written, this bill would do great damage to the Internet as we
know it. Enshrining a rule that broadly permits network
operators to discriminate in favor of certain kinds of services
and to potentially interfere with others would place broadband
operators in control of online activity. Allowing broadband
providers to segment their IP offerings and reserve huge
amounts of bandwidth for their own service--that is SBC--will
not give consumers the broadband Internet our country and
economy need. Many people will have little or no choice among
broadband operators for the foreseeable future, implying that
such operators will have the power to exercise a great deal of
control over any applications placed on the network.'' I ask
that it be included in the record.
Mr. Upton. Good. Without objection.
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Mr. Upton. Ms. Blackburn?
Ms. Blackburn. Thank you, Mr. Chairman, and I am glad you
have this statement from ADC Telecommunications. I was going to
ask for that permission and I will not make a comment about Al
Gore being the father of the Internet, saying as Tennessee--Ms.
Praisner, I think I would like to come to you, please. In your
testimony under Roman Numeral VI.1, you say that everyone loses
because local governments will not have proper management of
their streets and sidewalks, and I will have to tell you I am
pretty disappointed in hearing that come from you because it
looks disingenuous. But, I want to tell you that I think that
this, in no way, undermines the ability of cities to manage
their rights-of-way, and I think you can go to page 61 of the
bill, Section 406, and see that it specifically states that you
will ``continue to retain explicit authority to manage your
rights-of-way.'' Mr. Putala, to you, please, sir. I imagine a
lot of this, you are sitting there thinking they are fighting
over franchise fees and everything is going to go wireless so
it is a debate that is going to be out there at some point in
time. Very quickly to you because time is limited and we are
going to have a vote and others have questions, your project on
the EarthLink municipal networks that you were doing with
Wireless Philadelphia, I would love to have from you, if I
could please, sir, something about cost, about the revenue that
you will pay to the wireless Philadelphia Project to help
bridge the digital divide, and what you see as the cost-
savings--the amount of time that you will save in putting that
network up over that 135 square mile area, and then also what
you think the savings overall will be for the community. And I
will not ask you to expand on that right now, but I will ask
you to submit that to us.
Mr. Putala. It is fine. I can give you very briefly. $15 to
$20 million of capital expenditures on our nickel. We will be
sharing hundreds of thousands of dollars with Wireless
Philadelphia to provide computers and others to the lowest
income Philadelphia residents. We will be charging a retail
rate of somewhere in the neighborhood of $20. We are going to
charge a wholesale rate that will be available to anybody who
wants to bring customers to our network for about half that,
about $10. That same $10 half-price offer will be available to
lower income Philadelphia residents. The speeds will be about
1MB up and down, which is faster than the slower versions of
DSL, but slower than the faster versions.
Ms. Praisner. Okay. But no franchise fees and fussing over
right-of-way, right?
Mr. Putala. We operate on God's Highway, but I will note--
--
Ms. Blackburn. So I will tell you what, I am going to tell
you, sitting here, listening to this and being a Tennesseeian,
I think if we were discussing the Federal interstate highway
system, that there would be somebody out here trying to reserve
a lane for horses and buggies, I tell you. The status quo is
there are some who are trying to preserve that. Ms. Praisner, I
want to come to you, if I will. Ma'am, if I have a question----
Ms. Praisner. Okay.
Ms. Blackburn. [continuing] if you would let me----
Ms. Praisner. Oh.
Ms. Blackburn. [continuing] ask the question----
Ms. Praisner. Sure.
Ms. Blackburn. [continuing] for you. Under Roman Numeral
VI.3, you state community needs are essentially abandoned, and
it is my understanding that the committee draft requires any
new entrant to meet those needs and provide the PEG channels,
and I believe that new entrants may even provide more. Coming
from an area where there are plenty of content producers, they
are probably going to provide more in order to entice consumers
to choose their products, so I would like for you to very
quickly, in 30 seconds, tell me how you think this abandons
community interests.
Ms. Praisner. Well, we are talking about two different
things. You are talking about what you may offer as a
commercial provider to entice someone to subscribe. I am
talking about the franchise process which allows a local
government to identify what are the community needs through the
franchise process. And then in the process----
Ms. Blackburn. Okay. If--is that what you mean by meeting
social obligations?
Ms. Praisner. Yes.
Ms. Blackburn. Because you have mentioned that you think
there needs to be fair compensation through social obligations
to the community, and that is under point 4 of your testimony.
So if you want to submit something in writing to further
explain what you see as the social----
Ms. Praisner. I----
Ms. Blackburn. [continuing] obligation----
Ms. Praisner. [continuing] would be more than----
Ms. Blackburn. [continuing] in addition to the----
Ms. Praisner. [continuing] happy to.
Ms. Blackburn. [continuing] franchise fee and the----
Ms. Praisner. And I will also provide testimony in response
to your comments about page 61----
Ms. Blackburn. Okay.
Ms. Praisner. [continuing] I discuss when you----
Ms. Blackburn. That will be wonderful. Another thing, in
your testimony, point two, footnote four, want to go there
because you say, ``let there be no mistake, local governments
want competition as fast and as much as the market when some
States will--laws will sustain.'' There is a footnote there,
footnote 4, and when I went to the footnote, you discuss level
playing statutes and that also some cable franchises contain
these provisions as contractual obligations on local
governments. Now, my question to you is this, are you hearing
from your members who would like to offer an additional cable
franchise that might not be identical but they are prohibited
from doing so because of the level playing field laws or any
competitive contracts that cities might have signed simply to
try to get a cable provider into their area? And I would assume
that you are hearing what you are hearing from your members who
want some relief from anti-competitive laws like these, that
you are probably hearing from them, too. So when can this
committee--when can you get me some data from your organization
to document the scope of the problem as you see it, and let us
know how many cities want to offer an additional franchise but
are reluctant to do so out of fear of being sued and pulled
into court and having to spend taxpayer money to defend
themselves simply because they want to offer one service? If
you will, please submit that. And I am out of time. I am over.
Thank you and I yield back.
Mr. Upton. Mr. Gonzalez?
Mr. Gonzalez. Thank you very much, Mr. Chairman. My
apologies for being absent for much of the testimony. The--but
I assure the witnesses that we have your written statements
and, along with staff, we closely go over those. My question
will be to Mr. Ellis, and the second question to Ms. Praisner.
Mr. Ellis, of course we have the Texas experience. Texas Senate
Bill 5 regarding franchise authority that was passed recently,
and I would like to know what SBC has done under that
particular legislative scheme. Of course, we are looking at it
at the Federal level in preemption, but what has SBC done. And
if you will also go over the chronological order of when that
bill was actually passed and when you all have submitted an
application and where we are today. And then I, quickly, Ms.
Praisner, wanted to tell you about what I am already receiving
from the city of San Antonio questioning the FCC's authority,
or their interpretation that this proposed draft allows the FCC
to take over basically disputes that--as far as right-of-way
disputes and the concerns. And I apologize again if you have
gone over that, but those are the questions. Mr. Ellis, I
appreciate it.
Mr. Upton. You need to turn that mike back on. There is a
button there someplace.
Mr. Ellis. As you indicated, Congressman, the Texas
legislation was passed about 60 days ago, and since that time,
we have filed our initial application for the city of San
Antonio, 22 communities, essentially the entire metropolitan
area of San Antonio. We will--that was recently approved. I
think in the last week we got the Texas Commission's approval,
and we will go forward with deployments starting in December
will be our initial trial. We will start offering commercial
service sometime in the middle of the year. Was there some
other--we intend to go--we intend, in a 3-year period, to offer
video services to approximately half our customer base, about
roughly 18 million customers in 3 years.
Mr. Gonzalez. Okay. Well, thank you very much, Mr. Ellis. I
just wanted to point out under the Texas experience and that
SBC and other similarly situated companies are wasting no time
obviously to go through the license application, which has been
streamlined. Obviously, you have a State standard now. And then
to offer those services. I know that legislation was promoted,
and just that it is being taken advantage of. And then to Ms.
Praisner?
Ms. Praisner. Yes, sir. The concern that the Texas
municipalities have raised is what happens within the dispute
process, and with the issue of having to go to the FCC when--
and having the FCC in essence be court of last resort as
opposed to the court process which exists at this point. So I
think that is the concern that they were raising to you and the
concern that has been raised. We have very little experience
obviously with the Texas legislation at this point, and hope
that SBC will allow us, as they said--I am not sure if it is 18
million households, what percentage of the population that is
as well. That is the other issue we raised.
Mr. Gonzalez. Let me ask you, Ms. Praisner, real quickly--I
do have a little bit of time left. When it comes to right-of-
way disputes and anything that is, I guess, supplanted by, you
know, Federal authority where you have the FCC actually being
the final arbiter of any--is there anything similar to that in
any other municipal scheme where you would have a Federal
agency of this nature that would come in and actually act in
that capacity?
Ms. Praisner. No. I just checked with folks behind me
because I couldn't think of any. Not that I am aware of.
Mr. Gonzalez. All right. All right. Thank you very much. I
yield back the balance of my time.
Mr. Upton. Mr. Bass?
Mr. Bass. Thank you, Mr. Chairman. And, like my friend from
Texas, I want to apologize for not having been here for a lot
of the hearing. It has been a very busy day. But this is an
exceedingly important hearing on a very important bill,
updating telecommunications. The bill is complicated and there
may be some issues involving its interpretation, how it would
be--how it would work. I hope that my friend from Michigan, the
Chairman, will be--will have a prudent go-slow attitude about
this and that we don't move overly expeditiously so we make
sure we know what we are doing, because we know from the Act of
1996, there are problems that came about which might have been
resolved had we made a few little corrections. As I said a
minute ago, or I started to say a minute ago, that one of the
flaws of the 1996 Act was that in some instances it failed to
provide the FCC the authority to issue some of the rules that
were needed to enact their interpretation of what Congress
intended, and ultimately the legislation itself was
sufficiently obscure on its own to cause telecommunications
policy process to include what basically became routine visits
to the judicial branch, and basically slowing down the progress
of telecommunications growth. I am sure this provided plenty of
work for telecommunications lawyers, but it has been one of
my--one of the two objectives that I have had in approaching
this legislation, that it provide the business community and
the providers with regulatory certainty and avoid this routine
of--circle of going to court every time the FCC makes a
decision. My question to the panelists are are there any
specific areas in this staff draft that we are looking at today
that you think will cause more litigation, either through
uncertainty, the incumbent providers in industry looking to
draw out maximum benefit or actual confusion on the legislative
intent? In other words, uncertainty, incumbent providers in
industry looking to draw out maximum benefit or actual
confusion on the legislative intent? Yes, sir.
Mr. Rehberger. I may be repeating myself for the other
members, but since you asked the question, I pointed out that
separating the technology--packet-switching technology,
circuit-switching, voice versus data, to me creates a whole set
of questions and a whole set of interpretations that the
telecommunications lawyers will gladly debate for years to come
if the bill is enacted like it is. Our company, as I have
mentioned, we sell data, voice, Internet, VoIP-type products
all in one. I wouldn't know which regulations apply and which
didn't. I wouldn't know if the co-location obligations that the
ILEC had under the 1996 Act would apply to me now as a circuit-
switch or a packet-switch or a BITS player. I wouldn't
understand if the ILECs would continue once they were BITS
players to have to offer special access tariffs. So I think
that is the area that is most confusing, and I will say it
again. I think for some reason the--there has been a long hard
battle, as you have alluded to, since that Act in every major
level of judiciary, and I think we have gotten to a point now
where neither is happy, and maybe that is the point we will
stay. I think this is going to open up, again, the wound and
create a lot of--a lot more time in the courts.
Mr. Bass. Anybody else?
Mr. Willner. If I could just expand on that a little bit.
We talked a little bit earlier about network neutrality issues,
which is a subject that is really in fact being governed by the
marketplace today. I mean, I don't think my company, I don't
think Mr. Ellis' company, would commit marketing suicide by
doing things to consumers that other people aren't doing. The
question then is really is there a need for preemptive
legislation for a problem that doesn't yet exist, and in fact
the marketplace will probably govern much more effectively,
which will then give a lot of litigators, a lot of regulatory
attorneys the opportunity to try to reinterpret what network
neutrality really means under any statute that was trying to be
preemptive in the first place. So it is solving a problem that
doesn't exist, and therefore--there is language that is
ambiguous because we don't know exactly what we are solving
for, and is it really not something that should be dealt with
if the problem should develop in the competitive world?
Mr. Ellis. Congressman, I would only add that the Telecom
Act of 1996 was billed as a deregulatory act. That was its
promise. The summer of 1996, FCC came out with its first order.
It was 700 single-spaced pages. It had 1,400 footnotes, and
since that time, there have been literally thousands and
thousands of rules and regulations to implement that
deregulatory act. Any time you replace a marketplace with rules
and regulations, there will be litigation.
Mr. Bass. So you think this bill is overly regulatory?
Mr. Ellis. I think it is to a degree, but as I have said,
we support the bill. We understand the pragmatic situation, and
it is probably the best that we can do.
Mr. Bass. All right. I yield back.
Mr. Upton. Gentleman's time has expired. Mr. Radanovich?
Mr. Radanovich. Thank you, Mr. Chairman. I, first of all,
want to thank the Chairman and the committee staff for your
hard work and leadership on providing this draft and moving the
process forward. However, the draft legislation before us is
silent regarding digital content protection, and in fact some
content owners are concerned that Section 104 of the discussion
draft might even impede the ability to work cooperatively with
BITS and BVS providers to implement anti-piracy measures. My
question, when I get through with this, will be for Mr. Ellis.
I think I would like to get your opinion on this. The
imperative of protecting copyrighted work, both for the sake of
the individual artist and the continued growth of our economy,
requires that BITS and BVS providers be given unambiguous
authority to take preventative and other measures against
infringing activity by subscribers that are intent on breaking
the law. This might mean requiring its devices used to connect
to their service include copyright protection technology, or
being able to block access to peer-to-peer networks,
overwhelmingly used for infringement, or even terminating the
service of subscribers who are repeat infringers. I would
appreciate--Mr. Ellis, can you tell me your views on this
matter, and whether or not you would agree with suggestions for
clarifying the authority of service providers to employ anti-
piracy measures?
Mr. Ellis. Our position is very clear. This came up in our
company with respect to the copying of the songs and all of
that. We went to court rather than be the policeman of that. We
are not in a position--don't want to be in the position of
blocking access to the content. On the other hand, if somebody
is doing something against the Law, then we would be--we would
support and facilitate somebody else in enforcing those rights.
We don't want to be the policeman. We don't want to block our
customers access.
Mr. Radanovich. You don't want to be the cop and I
understand that, but you do support legislation that would fix
that?
Mr. Ellis. Yes, we would be supportive of that.
Mr. Radanovich. Okay, thank you. My second question is for
Ms. Praisner. Thank you for being here today. I do want to draw
on your statement that local government will never agree that
local franchise process has been impeded by--has impeded video
competition. The New York Times recently suggested that there
were 33,000 local franchise authorities in the United States,
and the Wall Street Journal recently reported that Verizon
alone has launched franchise negotiations in about 300
communities for its new video service, but has only secured
about 14. That article also reports that in some of those
communities, budget strapped local officials are greeting
Verizon with expensive and detailed demands, including in New
York State where Verizon faces requests for seed money for
wildflowers and a video hookup for Christmas celebrations.
Holliston, Massachusetts is seeking free television for every
house of worship. Others want flower baskets for light poles,
and that is just a few of about--of what the 300 communities in
which Verizon is attempting to secure franchises. It says
nothing about any of the other 32,700 franchise authorities
across the country and their possible requests. So my question
is, in light of those examples from the Journal article, will
you still never agree that the local franchise process has
impeded video competition, the very same video competition that
you stipulate reduces cable rates and enhances services?
Ms. Praisner. Yes, sir, I will still never agree because
the information in those articles is just not factually
correct, and I do have the information that can respond to
those. We did go out and find information. There is a provision
within the Massapequa Park, which is in New York, franchise
agreement for capital support payment for $27,000, which is the
same as a cable provider, but there is no provision for any
kind of planting of wild flowers. There are--and I can tell you
from my experience as a member of the Local State Government
Advisory Committee for the FCC. We found ourselves in the same
situation with cable--with cellular tower and with the rollout
of digital television. Continuously the FCC would hear of
accusations, outrageous statements of what local government was
requiring, and, in fact, it led us to ask the FCC to have the
applicants or the complainant notify--formally notify a local
government when its name was used so that the local government
would have an opportunity to provide the facts. And in every
situation that we have dealt with at the local-state government
level with the FCC, the facts turned out to be on the local
governments' side. So we are trying to respond to the Wall
Street Journal, and we will--hope to do so. It depends upon
whether the Wall Street Journal will print our article. And we
are also trying to respond to the New York Times.
Mr. Radanovich. If you could----
Ms. Praisner. I did----
Mr. Radanovich. [continuing] provide the response to the
committee----
Ms. Praisner. I will be more than happy to do so. Let me
just say that----
Mr. Radanovich. Actually, I am out of time.
Ms. Praisner. Oh, okay.
Mr. Radanovich. Thank you very much.
Ms. Praisner. Thank you.
Mr. Radanovich. Thank you, Mr. Chairman.
Mr. Upton. I will note that a reporter from the Wall Street
Journal just left the room before you answered that question,
so----
Ms. Praisner. Time----
Mr. Upton. I don't know if they wrote this--if he is the
author of that story or not, but I will--I am sure he will be
looking for some of us a little bit later. I am going to give 1
minute since there are not Democrats that have not asked
questions. I am going to yield 1 minute to Mr. Markey to ask a
final question----
Mr. Markey. Thank you.
Mr. Upton. [continuing] and then I will----
Mr. Markey. Thank you.
Mr. Upton. [continuing] proceed.
Mr. Markey. Thank you, Mr. Chairman. Mr. Ellis, I just want
to clarify, I think that what you are saying is that when you
are offering access to consumers to the public Internet, that
consumers can go where they want and access any lawful Internet
content, but that the broadband video service is not
necessarily going to offer consumers access to the public
Internet per se. Is that correct?
Mr. Ellis. That is pretty close.
Mr. Markey. Okay. Thank you. That helps us to understand
the playing field on this. And, Mr. Mitchell, in your
testimony, you say we have heard that part of the reason for
excluding BDS providers from Section 104 stems from a concern
for spam or viruses. Let me start by saying that we
respectfully disagree with that claim as a technical matter.
Mr. Mitchell. As a technical matter, that refers to whether
or not it is possible to combine an access to the public
Internet with a private-managed service on the same device. And
as a technical matter, it is possible to do that.
Mr. Markey. And so on that, you would disagree with----
Mr. Mitchell. Right.
Mr. Markey. [continuing] any assertions that that would be
a technical obstacle.
Mr. Mitchell. There are examples of things that do that
today. We have had MSN TV2 which is a product that is in the
market that delivers the public Internet service to a
television set. I think the issues that Mr. Ellis has referred
to regarding the ability to negotiate for content rights on a
private-managed network are legitimate issues, that is they are
legitimate business concerns. But purely as a technical ground,
is it possible to do this in a secure manner? Yes, it is
possible to do it in a secure manner.
Mr. Ellis. That is right.
Mr. Upton. Your 1 minute is rapidly finishing up. Mr.
Krause, did you want to respond? Do you agree with that?
Mr. Krause. Yes, we have a much more conservative view on
that, probably, than my colleagues at Microsoft. We have a lot
of experience around the world where there are other IP video
deployments going on. We are very mindful of the security issue
and we spend a lot of time on it. In fact, you know, we all
know our PC experiences here, don't have to be reminded of
them, but I will say that it is a very important point with the
content community. There are real security issues if you bring
the public Internet into convergence with the intranet. Our
companies don't let us do it. You don't have it on your laptop.
It is a big issue and you probably open yourself up to some
very serious security issues if you combine the functionality
of one----
Mr. Markey. If the content community did not object, would
there be a problem in sending it through?
Mr. Krause. If the content----
Mr. Markey. If the content community did not object, Mr.
Krause.
Mr. Krause. I am not such a big fan myself of the content
communities so to speak, but the customers will object because
you have the difference between your PC experience being a one-
on-one experience, and I can deal with being--getting a pop-up
ad on my PC about Viagra----
Mr. Markey. You just said people--you couldn't do it
because the content community wouldn't let you, and now I am
proposing that they do let you, and you are saying, well, I am
not a big fan of the content community. Well, they are on your
side now. They are saying they will let you do it, and now you
are saying you still won't want to do it, and I think that is
the real problem, and I----
Mr. Krause. No, I----
Mr. Markey. [continuing] am siding with Microsoft on this
one.
Mr. Krause. They have a valid----
Mr. Markey. I think Microsoft and the rest of these
companies are all closer to the truth than you are, Mr. Krause.
Mr. Upton. I think we will finished this conversation
another time.
Mr. Krause. Okay.
Mr. Upton. Mr. Stearns?
Mr. Stearns. Thank you, Mr. Chairman. Mr. Ellis, let me ask
you a question. You have been out there with deployment and
fiber technology over the last several years. Let us say we
don't pass a bill here and we do nothing. You are not going to
stop, are you? I mean, you are going to continue going forward,
are you? Aren't you, or now you are not?
Mr. Ellis. We are not going to stop.
Mr. Stearns. Right. So, I mean, whether we pass a bill or
not, companies like yourself will still continue deployment?
Mr. Ellis. We are going to continue deployment.
Mr. Stearns. Okay.
Mr. Ellis. Will we do it as fast? Will it be as wide-
spread? I gave you examples.
Mr. Stearns. That is the question.
Mr. Ellis. It is going to be 40 years at one a week. That
is what it is going to take if we negotiate one franchise a
week. I mean, you know, we don't want that. We want clarity,
certainty----
Mr. Stearns. Okay. We got----
Mr. Ellis. Let us say this bill doesn't----
Mr. Stearns. What is your 5-year plan for deployment?
Mr. Ellis. What is what?
Mr. Stearns. 5-year plan for deployment?
Mr. Ellis. We have a 3-year plan.
Mr. Stearns. What is your 3-year plan?
Mr. Ellis. We are going to go 3 years to half the homes in
our operating territory.
Mr. Stearns. And how big----
Mr. Ellis. 50 percent in 3 years.
Mr. Stearns. [continuing] is that? How big is that?
Mr. Ellis. How big is that? It is 18 million homes.
Mr. Stearns. In 1\1/2\ years?
Mr. Ellis. In 3 years.
Mr. Stearns. In 3 years, okay. Uh-huh. Uh-huh.
Mr. Ellis. That is our game plan. If we don't get this
legislation or get a Texas-type in each of our States----
Mr. Stearns. Okay. Now, let us say we do pass this
legislation and it is pretty much like you like, what will your
3-year plan look like then?
Mr. Ellis. Without the legislation?
Mr. Stearns. With the legislation.
Mr. Ellis. With the legislation? Well, we are going
community by community with the initial places----
Mr. Stearns. Well, I am just--Mr. Ellis, I am just trying
to get a contrast between what your 3-year plan is without this
legislation and what you perceive your 3-year plan would be----
Mr. Ellis. If it----
Mr. Stearns. [continuing] with this legislation.
Mr. Ellis. If we do not have this legislation, we will
deploy first in Texas because we have the State statute that
lets us deploy without going through the franchise process. We
will go to every single place we can in Texas first, and that
is roughly about 40 percent of our homes. That is an estimate.
That is where we will go first, and then we will go to the next
State that passes a legislation if there is----
Mr. Stearns. So you will go State by State?
Mr. Ellis. Yes.
Mr. Stearns. Okay. Mr. Putala, Mr. Rehberger has a quote
here that staff has put in place and I will just quickly read
it. ``The assumption in the bill that those who want to compete
in offering communications services to business/residential
customers can simply build their own network is mistake due to
basic economic realities.'' So I think Mr. Rehberger went on to
say that a rational marketplace would never undertake such an
effort, but, I think, Mr. Putala, the question is isn't
EarthLink going to--actually doing this right now? And what
would be your response to his comment?
Mr. Putala. We would note that we are trying to build out a
new WiFi municipal network. They are working in partnership
with cities around the country. But, we still rely on
commercial arrangements with folks like SBC so that we can
reach the vast majority of our members. The municipal WiFi
initiatives are literally--we don't break ground in
Philadelphia for another few months. We are trying to build out
these new networks to have new options, new pipes, to more
homes, which I think improves everybody's market conditions.
Mr. Stearns. Would I be fair to say though, based upon what
you are doing in Philadelphia, that you are sort of
contradicting what Mr. Rehberger says or not? Do you agree with
him or disagree with his statement?
Mr. Rehberger. Might I clarify?
Mr. Stearns. Well, I am going to give you a chance.
Mr. Rehberger. Okay.
Mr. Stearns. I am just trying to put it to Mr. Putala----
Mr. Putala. I don't----
Mr. Stearns. So he basically says that you are irrational
for doing this because it doesn't make economic sense----
Mr. Putala. Well----
Mr. Stearns. [continuing] yet I think you are doing this--
EarthLink is doing this in Philadelphia.
Mr. Putala. COMCAST also said we were irrational for doing
it in Philadelphia.
Mr. Stearns. Okay.
Mr. Putala. But it is going to be a challenge. It is going
to be hard, and I think that we are years away from having the
same kind of ubiquitous connections to--with multiple pipes to
everybody's home----
Mr. Stearns. So you agree with him then? You would agree
with him or disagree with him?
Mr. Putala. I would agree with him that the challenges of
building out new networks are significant indeed.
Mr. Stearns. Okay. Mr. Krause, my understanding is that
Alcatel's services as a vendor for WiFi and other wireless
systems. You have services for these. Do you agree with Mr.
Putala and Mr. Rehberger in billing out these particular WiFi
systems?
Mr. Krause. There are a number of technology domains in
which we are involved, both wireless and wireline, so we are
involved in----
Mr. Stearns. Yes.
Mr. Krause. [continuing] the WiMax partnership.
Mr. Stearns. Does it make economic sense for you to do
this? Do you sort of feel it does make economic sense, or are
you saying that you perhaps agree with Mr. Rehberger and
perhaps with what Mr. Putala's saying, it just makes no
economic sense, but they are still going ahead. I mean, what is
your position here? I mean, can you come out----
Mr. Krause. On the wireless?
Mr. Stearns. Yes.
Mr. Krause. Yes, on the wireless side, especially given the
recent movement on the digital television transition so that we
are opening up some spectrum. There are some great technologies
becoming available that will make reasonable business cases
possible for delivering certain kinds of service over wireless
networks.
Mr. Stearns. Okay. Mr. Salas? Here you are at Verizon
Wireless and how do you feel about this? Do you think there is
economic reality you are not paying attention to, or are you
able to go ahead with WiFi wireless services?
Mr. Salas. We have evaluated WiFi and what it takes and
what it can provide and we have not found what we thought to be
a compelling business case, and so we continue to watch. I have
built a number of networks in my career. It is complicated. It
is difficult. And there definitely is no free ride here, so I
am anxious to see how others here pull this off and actually
deliver a working system.
Mr. Stearns. Okay. Mr. Rehberger, I will let you have the
last word on that.
Mr. Rehberger. Well, the essence of my comments really
related to a ubiquitous network around the country, similarly
situated to what the Bell companies have today, not only for
consumers, but businesses, and my only point was this is why we
need for competition. We need network sharing and we need
network sharing with the right regulatory framework so that
companies like ours and others like ours can share the network
that--somebody used the word 100-year monopoly, okay, it took
to get the Bells to build that. Nobody is going to build that
same network again. Clearly, in certain cities, even in certain
towns, there is an ability based on the geography, based on
even the atmospherics, okay, in terms of using wireless, where
there is an ability that you can build out certain pockets. But
just as an example, you know, if a cell tower has--and I don't
know these terms--but a cell tower might have two, or three or
four T-1s with a service and cover a few city blocks. There are
probably a thousandfold times worth of telecommunication
packets in voice that would--that you could never service with
a cell tower. So you are going to need fiber. You are going to
need landlines. And you are going to need access, okay, to the
last mile to the customer. And that is the issue from a
telecommunications standpoint. We think this bill somehow--
this, you know, this idea that if you become a packet provider,
you no longer have the uni-access which was under the Telecom
Act of 1996, and there are implications that Bell companies can
take away or have the ability not to offer even special access
tariffs. It takes the competitors out of business. And those
are the protections that caused the innovation and price
cutting that Mr. Ellis mentioned at the beginning of his
testimony. It wasn't the R Box that voluntarily cut prices. It
wasn't the R Box that rolled out new technology. It was the
vendor, it was the companies like ourselves in the early days
like MCI and later on the Celex, that really brought to fore
this technology change you are seeing today.
Mr. Upton. Thank you. Ms. Cubin?
Mr. Stupak. Mr. Chairman, what about this side?
Mr. Upton. Everybody has had questions there. These members
have not asked any questions yet. You have asked 5 minutes,
right?
Mr. Stupak. Right. But I thought you said you were going to
add 1 minute.
Mr. Upton. Well, Mr. Markey asked for 1 minute to clarify
an earlier question.
Mr. Stupak. Okay. And then I will ask----
Mr. Upton. You have----
Mr. Stupak. [continuing] for 1 minute to clarify a question
I asked earlier after Ms. Cubin.
Mr. Upton. Okay. Ms. Cubin?
Ms. Cubin. Thank you, Mr. Chairman. I--everything I do here
has to do with rural America and trying to make sure that rural
America is served as well as urban America, and that we have
all of the same benefits. Mr. Mitchell, I would like to start
with you, and you said that you are providing broadband video
software and equipment to Comcast, Verizon and to SBC. Do you
have any rural customers right now?
Mr. Mitchell. We do not. Actually, just for clarification,
we don't supply equipment, just software.
Ms. Cubin. Oh, just software?
Mr. Mitchell. And at this point, our customers--our
announced customers are Comcast, Verizon and SBC in this
country.
Ms. Cubin. Realistically, can mid- or small rural companies
buy your technology today?
Mr. Mitchell. Yes, absolutely. The----
Ms. Cubin. Now, realistically?
Mr. Mitchell. Realistically, our technology is in the--the
IP technology is in the early roll-out stages, and it will take
some time to scale that out, but ideally we would like every
operator to be able to take advantage of the software and to be
able to support them in that role-out.
Ms. Cubin. Well, ideally, I would like that too, and I will
be watching.
Mr. Mitchell. Yes.
Ms. Cubin. Mr. Yager, many of the small Telcos in my
district tell me that they have a very difficult time, if not
impossible time, to negotiate retransmission agreements with
their programming. You know, I mean with networks. Is there a
reason that you can tell me from any of these perspectives why
that is?
Mr. Yager. Not really. I can't, not knowing the specifics.
Ms. Cubin. Well, I don't want to name any specific
networks, but what I'm kind of thinking is that there are a lot
of little small companies that they just don't want to be
bothered with.
Mr. Yager. Well, under the Law, if the cable system has
less than 1,000 subscribers, there is no re-tranmission consent
or must-carry requirement in effect. And so as you get into
rural areas, for the most part, the smaller cable companies are
not affected at all by must-carry or retransmission.
Ms. Cubin. I am talking about over 1,000 customers.
Mr. Yager. Okay. If it is over 1,000, without knowing the
specifics, I know of only--the gentleman on my right has just
negotiated a contract with somebody who withheld their services
for 7 or 8 months, but I don't know of any in the Wyoming area
who have withheld their service from the cable companies. I
mean either on retrans or must-carry.
Ms. Cubin. Okay. I am not--well, I will check further into
that because----
Mr. Yager. That would be----
Ms. Cubin. [continuing] I have received complaints and the
complaints are directed at actually a specific network, and so
I will just talk to you privately as to----
Mr. Yager. That is fine.
Ms. Cubin. [continuing] whether or not----
Mr. Yager. I would be happy to----
Ms. Cubin. [continuing] that is----
Mr. Yager. [continuing] look into it for you because----
Ms. Cubin. Okay.
Mr. Yager. I am not aware of any in Wyoming at all that
have withheld.
Ms. Cubin. Okay. Small companies want to pool their
resources and share a head end. Does NAB have any policy
prohibiting this at all?
Mr. Yager. No, we do not. If they--but if they pooled their
resources, shared a head end, and hand over 1,000 subscribers,
then they would be subject to retransmission and----
Ms. Cubin. Exactly.
Mr. Yager. [continuing] Must-carry requirements.
Ms. Cubin. Right. Do broadcasters have any concerns about
their signals being carried on an IP network?
Mr. Yager. Again, we are looking for a level playing field
for everyone, and the answer is, providing that the playing
field is level, that we have retrans and must-carry rights
across all video providers. No, we do not have any problem with
that.
Ms. Cubin. Good. Thank you, Mr. Chairman. I don't have
anything further.
Mr. Upton. Mr. Walden?
Mr. Walden. Thank you, Mr. Chairman. Mr. Yager I want to
follow up on that because I am trying to figure out--I am a,
you know, I am a radio guy, not a TV guy so stick with me on
this video stuff. I am trying to figure out though if local--
and the local is a really important issue for broadcasters,
especially television broadcasters, and if your programming is
put up on the Internet somehow, and I can dial into your
station here in Washington, D.C., and watch whatever you have,
isn't that a problem?
Mr. Yager. Well, that is a major problem if the Internet
takes a network program into an area that we are----
Mr. Walden. Right.
Mr. Yager. [continuing] licensed for with our network or
contracted----
Mr. Walden. Right.
Mr. Yager. [continuing] with our network. That would be a
major problem.
Mr. Walden. And so how do you stop that in this
environment?
Mr. Yager. Technically, I can't speak to it, but we have
stopped it so far. I mean, Internet providers are not carrying
network programming outside--a matter of fact, I am not sure if
they are even carrying it. There was a case, as you all know,
that New Orleans, when Katrina hit----
Mr. Walden. Right.
Mr. Yager. --WWL and WDSU put their continuous news
coverage on the Internet but there was no network----
Mr. Walden. That is locally originated.
Ms. Yager. All local originated programs.
Mr. Walden. But is there any prohibition of an IP provider
from doing----
Mr. Yager. Yes. If an IP provider were to take our signals
without our permission and put them on there, they would be
violating the retransmission consent laws and that is where we
would have control over who gets to see our network----
Mr. Walden. All right. So you are not too concerned about
that issue.
Mr. Yager. Well, I am always concerned about the pirating
of our signals, and as Congressman Cubin knows, and I would be
very concerned in Wyoming that the Colorado or Denver stations
be brought into all of Wyoming in stations----
Mr. Walden. Right.
Mr. Yager. [continuing] in Cheyenne and Casper would then--
would lose their network-based service----
Mr. Walden. But that is----
Mr. Yager. [continuing] and would lose its syndicated
programming rights before we contact for people like Oprah
Winfrey Show and----
Mr. Walden. Yes. I mean, I have enough of those issues with
XM and Sirius dropping programs----
Mr. Yager. I understand that.
Mr. Walden. [continuing] in on top of where I thought I had
market exclusivity for the product I am buying. But, that is
another subject for another day. Mr. Mitchell, do you support
broadband video service providers being required to integrate
Internet access into the broadband video service? Is that
something Microsoft supports?
Mr. Mitchell. I don't think that forcing an integration of
disparate services together is the right way to go. For one
thing, it is not clear that consumers actually want that force-
cum combination. I think making it available, having an option,
is perhaps a nice thing if it makes good business sense. But,
legit, just forcing it together, no.
Mr. Walden. Okay. One of the concerns I obviously hear
about, in addition to every city in my district, I have gotten
the same paragraph from--individualized, of course--but concern
about franchise fees and about PEG and all of that. I even--
some of them apparently have my Blackberry address so I will
have to figure that out. But, Mr. Mitchell, I wondered--the
other issue that comes up a lot is E911, and how are the E911
requirements tailored, if the E911 requirements play to VoIP,
do they have any--do you have any concerns about types of
services that can be included in the bill's definition of VoIP?
Do other people have comments on that issue?
Mr. Mitchell. Well, I think my sort of overarching comment
regarding any services like E911 that are--like 911--that are
attached to phone service as we know it today, traditional
telephone service, that you apply the E911, or, you know,
future versions through services that are substitutive--
substantially substitutive, so my examples are, you know, the
Xbox, Instant Messaging clients, Xbox Live Game Services that
do not make sense to apply those kinds of provisions to because
they are not substantive----
Mr. Walden. Well, if it works like a phone----
Mr. Mitchell. If you have the expectation that you pick it
up and you dial 911 and you get somewhere, you pick it up and
you dial 1-800-Dominos, you get Dominos. You know, then it is a
phone.
Mr. Walden. All right.
Mr. Mitchell. So----
Mr. Walden. Substitution test. Ms.--is it Praisner? I am
sorry.
Ms. Praisner. Praisner.
Mr. Walden. At the beginning, how many franchise fees--one
of the--and this is really difficult stuff for me because you
have incumbent providers that go clear back to Marconi. Not Mr.
Yager himself, but Marconi, and then everybody says then----
Mr. Praisner. You and I won't care then.
Mr. Walden. [continuing] comes in--I mean, you don't pay a
franchise fee to have broadcast signal, but cable shows up with
wire and they, you know, disturb your streets and whatever
they--he doesn't, but others probably have, and--what about
satellite video providers? You don't have a franchise on them,
do you?
Ms. Praisner. No. They also don't provide local PEG
channels.
Mr. Walden. That is true.
Ms. Praisner. And that is the big----
Mr. Walden. Is that really the issue here?
Ms. Praisner. Well, that is part of the issue.
Mr. Walden. The other part is just the revenue----
Ms. Praisner. The right-of-way issue and the way you
calculate a social obligation and participation in that social
obligation.
Mr. Walden. All right. All right. Thank you.
Ms. Praisner. Thank you.
Mr. Walden. I am out of time. Thank you, all. I appreciate
your testimony.
Mr. Upton. Before we adjourn this panel, Mr. Stupak has one
last question to clarify.
Mr. Stupak. I thank you, Mr. Chairman. I appreciate the
courtesy. Since in the 1996 Act, myself and Mr. Barton wrote
the right-of-way provision that became part of the 1996 Act. So
I want to ask Ms. Praisner, because Ms. Blackburn asked a
question about the rights-of-way and I don't--I was watching in
my office and I didn't think you had a chance to explain it,
and I want to make it--explain to us all how it works in the
real world.
If you look at page 61 of the draft, it says that the
service provider shall ensure the safety of the property. So
even if the local government has the opportunity to enforce the
provision after in effect, how does it work in the real world?
Could you explain that for us? Because I think it would be----
Ms. Praisner. Well----
Mr. Stupak. [continuing] beneficial for most of us.
Ms. Praisner. [continuing] right now, of course, there is
an--franchise agreement with the local government with
requirements for the right-of-way management issues and
requirements as far as when they come in for permits what,
where, and how they will dig, and a variety of issues. And
there is also the relationship that has some obligations
because it is a contractual relationship for rent of the local
right-of-way.
The concern with that language is that although there is
language on the next page that seems to suggest that the local
government has some capacity, the way this is written is--and
as I indicated to the Chairman, we are more than happy to work
through. The way this is written, it is the local--it is the
provider who shall ensure and I am not sure to whom and how and
it would seem to me that it should be the local government
setting the requirements from a public safety perspective.
Because our rights-of-way right now are obviously a very
important issue. They always have been. But in this era of
post-9/11, the issues of public safety and access through those
rights-of-way are even more critical.
Mr. Stupak. Thank you. And thank you, Mr. Chairman.
Mr. Upton. Just one note. I think that that is the same
language we got from the Cable Act. I think it is pretty much
identical. But we will continue to work and I am happy to say
we are going to hear again in about 5 seconds, the votes. There
it is. See? And this panel is now excused. And we have a series
of votes on the House floor, so we will start the second panel
at 3:10.
[Brief recess]
Mr. Upton. I know other members are watching from their
offices as I often do at this point. So now that they see we
are going to get started, they are going to listen attentively
and come down and ask questions. It has been a long day. I
understand at least one of you has to leave early to get a
plane to go back. So we will start the time clock.
Again, we appreciate the testimony that has come in. And I
should say for those watching, we are joined by Dr. Frank Bowe,
Professor, School of Education and Allied Human Services, from
Hofstra University; Mr. Tony Clark, President of the North
Dakota Public Service Commission, on behalf of the National
Association of Regulatory Utility Commissioners; Mr. Harry
``Hap'' Haasch, great guy from the good State of Michigan,
Executive Director of the Community Access Center in Kalamazoo
for the Alliance for Community Media; Mr. Gene Kimmelman,
Senior Director of Public Policy, the Consumers Union; Mr.
Delbert Wilson, General Manager of Industry Telephone Company;
and Mr. Joel Wiginton, Vice President and Senior Counsel for
Sony. Dr. Bowe, let us start with you. Welcome.
STATEMENTS OF FRANK G. BOWE, PROFESSOR, SCHOOL OF EDUCATION
AND ALLIED HUMAN SERVICES; TONY CLARK, PRESIDENT, NORTH DAKOTA
PUBLIC SERVICE COMMISSION; HARRY HASSCH, EXECUTIVE DIRECTOR,
COMMUNITY ACCESS CENTER; GENE KIMMELMAN, SENIOR DIRECTOR OF
PUBLIC POLICY, CONSUMERS UNION; DELBERT WILSON, GENERAL
MANAGER, INDUSTRY TELEPHONE COMPANY; AND JOEL K. WIGINTON, VICE
PRESIDENT AND SENIOR COUNSEL, SONY ELECTRONICS
Mr. Bowe. Thank you, sir. Mr. Chairman, thank you for the
hearing and for inviting me. And I do want to extend that also
to the members on both sides. I'm appearing today on behalf of
a large number of organizations, people with disabilities, a
very wide range of groups. And we all want to say we are very
deeply appreciative of the language in the staff draft. Both
the first draft and the second draft have some very positive,
extremely meaningful language, in Section 207 and 405
especially. But it is very important language and it was not
weakened at all from the first draft to the second draft. The
disability community is really very, very delighted to see
that. And we also want to tell you in light of all the comments
this morning about some bipartisan friction here, but we have
to end the friction at all between minority and majority sides.
On the disability language, we have seen them working together
very cooperatively and very effectively.
I want to say that going back with the 1996 Act, people
with disabilities have always had to look to this Congress for
accessibility language even though there are all kinds of
millions of people with disability. Although so many
disabilities, so many different levels of need, that we have
never been able to get what we need from the marketplace.
Rather, what we need here is a final accessibility language,
and it is very important that we get it.
The third point I want to make is that the language that we
have, accessibility now in the many--applies specifically and
almost exclusively to the public's telephone network. But
people with disabilities today are using the Internet. We are
using technology that did not exist in 1996. And so we
increasingly--we are living in a world beyond statutory and
regulatory provisions for accessibility for people with
disabilities. So we firmly need legislation, very important to
us that there be a law in making.
And you may remember, Mr. Chairman, because you came to a
demonstration that I did here in Rayburn. I did another one on
the Senate side. And we have shaped most demonstrations about
512--second, which is about one-third as big. Then Mr. Ellis
was talking about providing to his customers. So we are able to
get disability accessibility including for the--at the level
that we now have DSL and cable modems. We are about to achieve
it, however--and I really can't emphasize this enough, but
technology continues to evolve so rapidly and so exponentially
that you count on--law making passed on while the technology is
right in front of you. You have got to do the law making based
on the technology you know will be coming, and technologies
that you may not know be coming. In other words, we have
learned very much from the many--we really cannot have law
making about the last wave. We have really got to try to make
it about the next one.
Give you an example, more and more videos now are being
streamed over the Internet, and this is an example, this
hearing. A number of people have told me they are not here but
they are watching it on the Internet. Just one example of
something that absolutely not in existence in 1996, which
raises all kinds of questions, and one of which, very simply,
is what about captioning? And we have captioning on television,
cable, and satellite. All are captioned. But when you get to
Internet streaming, it is not captioned. We now have some 30--
phones and other PDA devices, not captioned. That raises all
kinds of questions, so we feel very strongly at Mr. Markey's--
the caption on your video is really much too important to spill
over to the FCC's discretion, and for the FCC to have a chance
to review it every 4 years. This should not be the case.
Captioning should be something that is brought into the statute
as it is in the 1996 Act. It should be in the statute.
And while I am speaking of the 4-year review, that really
should be two. Technology is developing so rapidly that to have
a 4-year review is really much too infrequent.
People with disabilities, what we need is high-speed--we
need it on all connections, and I can't emphasize that enough.
When I do sign language with someone else, I am doing peer-to-
peer. I am not doing--through the end of the cable
architecture. It is a whole different arrangement than if I am
doing peer-to-peer, I have to have high-speed in all directions
and not just upstream and downstream. We will benefit in
everyday communications and education on healthcare and in
employment if we have these technologies, if we have them
available everywhere, and if they are affordable. So thank you,
Mr. Chairman and Mr. Markey.
[The prepared statement of Frank G. Bowe follows:]
Prepared Statement of Frank G. Bowe, Dr. Mervin Livingston Schloss
Distinguished Professor, Hofstra University
Good afternoon, Mr. Chairman, Congressman Dingell and members of
the Committee. My name is Frank Bowe, and I am pleased to appear today
to provide invited testimony on the second staff draft of a bill to
revise and extend the landmark Communications Act of 1934. I am a
professor at Hofstra University, on Long Island. I am testifying on my
own behalf. This testimony is supported by the Alliance for Public
Technology, American Association of People with Disabilities, American
Council of the Blind, American Foundation for the Blind, Association of
Late-Deafened Adults, California Coalition of Agencies Serving the
Deaf, Hard of Hearing, Inc., Communication Services for the Deaf, Deaf
and Hard of Hearing Consumer Advocacy Network, Deaf and Hard of Hearing
Service Center Inc., Inclusive Technologies, National Association of
the Deaf, Northern Virginia Resource Center for Deaf and Hard of
Hearing Persons, Self Help for Hard of Hearing People, TDI (also known
as Telecommunications for the Deaf Inc.), WGBH National Center for
Accessible Media, and World Institute on Disability. These
organizations together represent millions of Americans with
disabilities who have a vital interest in making sure that the
communications technologies of today and tomorrow will meet their
communication needs.
Members of the Committee, our community has already come before you
once this year to address accessibility issues, when Karen Peltz
Strauss testified to the Subcommittee on Telecommunications and the
Internet on April 27. My testimony builds upon her statement, with the
important advantage of being able to applaud your staff draft's
treatment of the issues she discussed.
Permit me to preface my remarks by noting that Americans with
disabilities are daily using, and greatly benefiting from, Internet-
enabled communications technologies that have emerged since enactment
of the 1996 Telecommunications Act. When I demonstrated broadband two
weeks ago in the Dirksen Senate Office Building, Senator Conrad Burns
of Montana spoke movingly about a 12-county area in his State that did
not have a single physician. Broadband, the Senator reported, is
crucial to the well-being of his constituents. To illustrate, in the
1970s Howard Rusk, a pioneer in rehabilitation medicine, told me that
life expectancy for people with quadriplegia was about five years post-
injury. Today, it is a great deal longer, due to increased knowledge
about how to treat such secondary conditions as autonomic dysreflexia.
But that expertise is not universal among primary-care providers. It
resides at the Rusk Institute at NYU, the Shepherd Center in Atlanta,
and at the Rehabilitation Institute of Chicago. Broadband extends their
ability to provide quality care to Dearborn, Michigan, and Cheyenne,
Wyoming. To use another example, dermatoscopy takes pictures several
skin layers deep. Broadband instantly transmits the images to a
specialist. As a result, a dermatologist in Dallas/Fort Worth can
diagnose a skin condition of a patient in Clearwater, Florida, as
accurately as can a local one.
Likely, those dozen counties in Montana do not have a single sign-
language interpreter, either. Broadband can connect consumers with
interpreters irrespective of geographical location. This has the added
advantage of eliminating the wasted travel time of interpreters, making
them more available to meet our needs.
Let me shift now to consumer use of the Internet and of broadband.
A report this year by the Pew Internet and American Life Project found
that 68 percent of adults use the Internet. The Census Bureau reported,
on the same day that I demonstrated broadband in the Senate, that home
access to the Internet has now passed the half-way mark nationwide. A
large and rapidly growing proportion are broadband subscribers who use
it not only for shopping but also for public policy participation,
education, and communication with family, friends, and coworkers. For a
glimpse into the near-term future, consider that the teen site
MySpace.com had more hits in August than did Google: 9.4 billion page
views. New users of the site are signing up at a rate of better than
three million a month. This is yet another indication that broadband is
here to stay.
Here is my point: Consumers are driving the broadband engine. They
are rapidly making broadband an indispensable part of the fabric of
everyday life in this country. Consumers should have a seat at the
table as broadband policy is set. That is why I so much appreciate the
fact that the staff draft offers much-needed disability consumer
protections. It is also why I appreciate this invitation to testify
today.
People with disabilities, simply stated, believe that broadband
should be available everywhere, at affordable rates. Our aim should be
to accelerate the creation of a broadband umbrella that covers the
country. Our policy should be to regulate evenly across platforms, so
as to ensure disability access across all communication platforms. This
means applying the same standards to wireline, wireless, cable, and
satellite providers and suppliers. That, in turn, necessitates federal
rules for accessibility.
People with disabilities, as well as their families--the Census
Bureau reported this summer that 21 million American families include
at least one person with a disability--friends, coworkers, and others,
not to mention my students, will win with rapid deployment everywhere
of broadband, particularly fiber to the curb and even to the home,
featuring high speeds in all directions. It is not enough just to have
it downstream, with much slower speeds upstream. Bidirectional peer to
peer interactions at high speed enable each of us to be creators, and
not just consumers, of broadband-provided content. While many of us
use, and benefit from, today's level of DSL and cable-modem broadband,
as I demonstrated to this Committee in June, and to the Senate Commerce
Committee last month, high-speed connections in both directions, with
rapidly refreshed frames, greatly improve video communications,
particularly in sign language. In this as in other areas, we must bear
firmly in mind a lesson learned from the 1996 Act: legislation needs to
address, and foster, tomorrow's technologies and not just today's.
With advanced telecommunications products and services, our daily
lives will be improved, as we access more information, make better-
informed consumer choices, and enjoy much richer and more rewarding
interactions with family and friends. Our education will no longer be
limited to geographically proximate institutions. Our employment will
be supported and our ability to work flexible schedules enhanced.
Critical to these improvements are the disability consumer
protections contained in the staff draft. The organizations supporting
my testimony today greatly appreciate inclusion of protections in this
draft to ensure that broadband products and services are accessible to
and useable by people with disabilities. For example, the staff draft
requires that video be captioned when it is streamed over the Internet,
as it increasingly is. Currently, section 713 of the Communications Act
mainly requires captioning only for broadcast, cable-cast, and
satellite television programming, largely because Internet video was
not available in 1996. Similarly, the staff draft, in section 207,
defines relay services to include video, and not just text,
communications for people who are deaf, hard of hearing, and/or speech-
impaired. It calls for interoperability of Internet-enabled relay
services, including video relay.
When Congress amended the Communications Act in 1996, it added
section 255, calling for equipment and services to be accessible to and
useable by people with disabilities. But to date, that section has been
interpreted to apply only to the public switched telephone network, not
to the Internet. This was, of course, because scarcely anyone used the
Internet for voice or video communications in 1995 and early 1996. The
staff draft, in section 405, extends these accessibility requirements
to broadband products and services. And, recognizing that today's
telecommunications products are electronic, into which accessibility
can easily and readily be incorporated during the design stage, the
staff draft requires that makers and providers of new broadband
products and services provide access unless doing so would present them
with an undue burden. The 1996 Act, reflecting an earlier era, one
characterized by already-existing products and services, allowed a
lower readily achievable standard. As Ms. Strauss noted in her April
testimony, the fact that today's communications Internet Protocol
technologies rely more on software-based solutions makes it easier,
faster, and less costly to implement access features than had been
possible with many previous telecommunications technologies
All of this matters, and matters urgently. Just three out of every
ten adults with disabilities today are employed. Broadband promises to
help because it is always-on, high-speed, voice/video/data
communications. Many deaf and hard of hearing Americans are using
instant messaging daily, now video as well as text. They are signing to
each other, using digital video cameras and webcams. Signing over video
connections offers the closest possible functional equivalence to voice
telephony between persons who can hear. In the workplace, IM and video
conferencing permit instant accessibility. They lower the cost to
employers of accommodating a worker who is deaf, by alleviating the
need for interpreting services except for formal, in-person meetings.
The House draft access language for broadband equipment and
services is vital for people who are blind or visually impaired who
must often struggle with graphical-only interfaces or other
inaccessible equipment and service which, increasingly, restrict access
to vital broadband communications. In addition, because broadband is
digital, it also speeds up conversion of written material into formats
that people who are blind can use--large print, speech, and even
Braille. This lowers the cost to employers and educators of
accommodating people who are blind or visually impaired.
And of course broadband supports telecommuting. While some
Americans with disabilities may not opt to telecommute, others will,
because broadband helps people with chronic health conditions or
physical disabilities to expend far less energy in nonproductive
commutes and to leapfrog those transportation and architectural
barriers which remain.
With respect to education, the 2004 reauthorization of the
Individuals with Disabilities Education Act explicitly permits video
conferencing for Individualized Education Program (IEP) team meetings.
Teens with disabilities may participate in video conferencing sessions,
as may parents with disabilities, through broadband-enabled access,
including remote interpreting and document accessibility. As a
university professor, I am daily reminded how colleges increasingly use
electronic media for everything from course registration to assigned
readings to submission of student work. I found it necessary this fall
to write, for Hofstra University, a primer on how to make our
Internet2-based digital environment accessible to students, staff and
faculty with disabilities. I see a similar need here. Broadband, if
made accessible in the ways envisioned by the staff draft, will greatly
contribute to the post-secondary education of people with disabilities.
Broadband, I am convinced, will not only improve the quality of
medical care for our most vulnerable citizens but also will help to
conserve public resources. To illustrate, while people with
disabilities account for 16% of Medicaid beneficiaries, because their
annual medical costs are higher than are those of Medicaid recipients
who do not have disabilities, their care accounts for 43% of Medicaid
spending. In 2003, for example, Medicaid costs for persons with
disabilities added up to $80 billion. Broadband will help us to enhance
quality of services while also constraining costs. It will do so by
enhancing preventative care, by permitting better monitoring of
people's health, and by enabling them to live and work more
productively.
Broadband helps older Americans live at home longer, by affording
them instant contact with family and caregivers, reducing costs of
institutional care. Similarly, wireless broadband supports independent
living in the community of persons with intellectual disabilities and
many with mental and emotional disorders. This includes individuals who
were deinstitutionalized pursuant to the Supreme Court's 1999 decision
at Olmstead. Two cell phones, the TicTalk, from Enfora, and the
Firefly, from Firefly Mobile, are illustrative. Each has just a few
buttons. Each is pre-programmed with numbers for family, employer and
emergency support personnel. By touching just one button, a person can
instantly be in two-way communication to ask questions, receive
directions, and request in-person assistance. These cell phones promise
to allow a small team of counselors to provide independent-living and
employment support to a large number of individuals in a community, at
much lower per-person, per-year support costs than are otherwise
available. Manufacturers could add two-way video to these handhelds,
for even easier and more effective two-way communication.
Before I close, let me not overlook universal service. I know that
this Committee and the Federal Communications Commission as well prefer
to deal with universal service next year rather than this. Universal
service is absolutely essential to the continued vibrancy of our
Nation's public communications. We must find ways to protect and
preserve it despite present threats to its funding base as our nation
shifts to Internet-enabled communications technologies. Specifically,
we must make sure that providers of these technologies are equally
bound to contribute to the support of universal service programs,
including relay services, that are designed to make communications
accessible and affordable for all Americans.
In closing, let me thank you for considering our views and, in the
staff draft, for responding to the needs of people with disabilities.
For Americans with disabilities, a new national policy on broadband is
urgently needed. Many of the communications technologies we use today,
and those we are excited to think about using tomorrow, have and will
emerge in the post 1996 Telecom Act ``world''. Critically important
disability access provisions will exist only if Congress enacts an
updated framework for telecommunications.
Thank you.
Mr. Upton. Thank you. We appreciate your testimony, for
sure, and appreciate your wonderful work in this issue over the
years. And I have--I know Mr. Engel and I, Mr. Markey, too,
have all appreciated your leadership and participated in your
demonstrations. Mr. Clark?
Mr. Bowe. Thank you.
STATEMENT OF TONY CLARK
Mr. Clark. Thank you, Mr. Chairman. It is an honor to be
here, and I thank you for the invitation--and Mr. Markey as
well. It is especially an honor to be before your committee
because, although I have been proud to call North Dakota home
for about the past 20 years, there are an awful lot of Clarks,
both present and past, who call Michigan home, so it is a State
that I certainly have a very warm spot in my heart for.
Today I am here to represent----
Mr. Upton. You are supposed to go like this.
Mr. Clark. All right.
Mr. Upton. Where you are from.
Mr. Clark. Alpina, Towwes, and all points in between. It
can be somewhat of an intimidating thing to try to represent
quote/unquote the view of the States or the State Commissions,
because it is sort of like asking someone, well, what is the
view of Congress. Well, we are an organization and association
which is made up of 50 different States, some of us
Republicans, some of Democrats, some appointed, some elected.
So what I will try to do in just a very brief overview of our
written testimony is to highlight those points where there
seems to be some consensus amongst State regulators, and to the
extent that there may not be consensus, if I offer sort of my
own opining as one State official, I will try to identify that
as well.
Clearly, telecommunications markets are changing, and the
old regulatory constructs that we have had, both at the Federal
and State level, are crumbling around that technological
innovation that has happened. And in response to that, State
regulators have, I think, a very commendable job of trying to
assess where the markets are today, what are roles are and
perhaps should be, and what the Federal role is and perhaps
should be in any future Telecom Act. We have come out with a
set of principles that we think should be embodied in any
changed to the Telecommunications Act of 1996, and I would just
really highlight two main points that State Utility
Commissioners seem to have general agreement upon.
The first is that whatever happens on a going-forward basis
should be technologically neutral, that the means of
transmission really shouldn't be the important and the driving
factor. And to the extent that there are regulations that are
placed on telecommunications, the things that State Utility
Commissioners look at as really the most important factors
where there probably will be the most regulatory intersect on
some level or another is where there are an essential service
provided. And when we say essential service, honestly, what we
are probably talking about is some sort of either POTS--plain
old telephone service--or a replacement for that sort of one
basic primary line that consumers have access to, where there
is critical infrastructure involved and where there is some
sort of market power. Where any one of those things doesn't
exist, the need for regulation goes away. States have been
stepping back in dramatic fashion from economic regulation, and
we would anticipate that that would continue to be so.
Once there is determined that there should be some sort of
regulation, then what we have asked is that there be an
analysis of core competencies, who does what best. We have
stepped forward and said that we really believe that old end-
point jurisdictions, interstate versus intrastate, it just
doesn't make much sense anymore in today's Telecom market.
Really what we should be looking at is who does what best? What
level of government? And to that end, we have said that we
think the Federal Government job does a pretty good job
probably of setting some standards, and maybe more of that has
to take place, but that State government and State commissions
have really historically been the best at adjudicating specific
issues and enforcement measures, at building records, and at
carrying forward in a very fact-specific manner anything that
may come up that we can't predict today.
As far as sort of what we see good in the draft, what we
see potentially needing some more work, we do appreciate that
it establishes a baseline on some social service policies like
E911, Universal Service, and we appreciate the fact that it
does acknowledge the core competency of State commissions,
which is often enforcement, although we would like to see
perhaps more flexibility for States to deal with specific
situations. And where we see more work needed is something that
has been talked about a number of times here today, but is
concern about that just throwing in a new silo which could
create these same types of arbitration that we have seen in the
past rather than looking at things from a more structural and
holistic standpoint.
With that, I will look forward to any questions you might
have.
[The prepared statement of Tony Clark follows:]
Prepared Statement of Hon. Tony Clark, President, North Dakota Public
Service Commission and Chairman, Telecommunications Committee, National
Association of Regulatory Utility Commissioners
Chairman Upton, Ranking Member Markey and members of the
Subcommittee, thank you for the opportunity to testify today. I am Tony
Clark, chairman of the NARUC Telecommunications Committee and president
of the North Dakota Public Service Commission. NARUC represents State
utility commissions in all 50 States and US territories, with oversight
over telecommunications, energy, water and other utilities.
We appreciate the opportunity to share our perspective and insights
about the staff discussion draft on Internet protocol and broadband
services, which we view as the beginning of an important dialogue at
this Subcommittee about the appropriate legal and regulatory framework
to encourage innovation and protect consumers in today's evolving
communications market.
The telecommunications industry as we know it is undergoing
tremendous transformation and restructuring. The long-distance industry
has mostly disappeared and once mighty competitors are being absorbed
by their former adversaries in the local phone business. New players
have emerged in the nascent ``nomadic'' VOIP industry and a growing
number of younger consumers are ``cutting the cord'' to use their
wireless phone as their only phone.
Today's marquee battle is the grand duel between cable and baby
Bell companies over who will dominate the ``triple play'' or
``quadruple play'' market of voice, video, data and wireless bundles,
but this battle could easily give way to one between the network owners
and the ``edge'' providers like Yahoo!, Google and Microsoft whose next
wave of disruptive technologies could turn today's giants into
commodity providers. Or new wireless broadband offerings could flood
the market with ``last mile'' transmission options, driving prices down
and leading to another round of consolidation. Just last week, Sprint-
Nextel announced a joint venture with four cable companies to deliver
TV shows on cell phones, and BellSouth's chief technology officer
referred to a search engine company as a serious potential competitor.
NARUC's members have embraced this new paradigm of innovation and
change because we see it as a powerful engine of economic development
and consumer empowerment in each of our States. Recognizing these
seismic changes and a corresponding interest from Congressional leaders
to reexamine the foundations of the Communications Act, NARUC
commissioned a Legislative Task Force last year to take stock of the
current legal and regulatory baseline and make recommendations on
whether and how it should be revised. After listening to numerous
stakeholders and intensive internal discussions, the Legislative Task
Force reached two important conclusions:
The first was that any broad reform must be technology neutral.
Even the leading luminaries and entrepreneurs in the telecommunications
industry don't know where today's transformation will lead or end. In
the chaos that is the genius of modern capitalism, they are constantly
placing bets, forming new ventures, making mid-course corrections and
sometimes losing big money when things don't turn out as expected. With
that in mind, it struck us as untenable for policymakers to build a
framework around any kind of technology, even a widely deployed one
like Internet protocol. Such an approach would invariably choose
winners and losers and ultimately distort investment decisions as
capital and energy flowed to products in the best regulatory ``silo.''
The second conclusion was the development of our ``functional
federalism'' concept, which is the idea that if Congress is going to
rewrite the Telecommunications Act, it doesn't have to be bound by
traditional distinctions of ``interstate'' and ``intrastate,'' or
figure out a way to isolate the intrastate components of the service.
Instead, a federal framework should look to the core competencies of
agencies at each level of government--State, federal and local--and
assign regulatory functions on the basis of who is properly situated to
perform each function most effectively. In that model, States excel at
responsive consumer protection, efficiently resolving intercarrier
disputes, ensuring public safety, assessing the level of competition in
local markets and tailoring national universal service and other goals
to the fact-specific circumstances of each State. Economic regulation
is necessary only where there is market power and if robust competition
one day removes the need for economic regulation of all types, we
believe that will be a good thing.
This is not actually a new model. For the past several years,
wireless carriers have been governed under Section 332 of the Act,
which does not declare wireless to be interstate, but rather assigns
appropriate functions to State and federal authorities. It assigns
spectrum management functions to federal authorities, includes a
rebuttable presumption of competitiveness for wireless carriers, and
allows states to handle consumer protection and other terms and
conditions of service. Wireless carriers are also allowed to avail
themselves of State arbitration procedures for interconnection to the
wireline phone network. Under this model, the wireless industry has
already eclipsed the traditional phone business in total number of
subscribers and is only growing stronger.
While NARUC's members are still analyzing the discussion draft, we
want to raise a number of high level issues and serious concerns.
First, we are concerned that this discussion draft is very technology
specific by according special status to any service or infrastructure
that utilizes ``packet switching.'' While packet switching is
supplanting circuit-switching and time-division multiplexing today,
something else that may or may not be a successor protocol is
invariably in the queue behind it. While it might take longer and
require more dialogue among disparate stakeholders, we encourage you
instead to pursue a technology-neutral approach that looks to the
salient features of each service, such as whether it has market power,
whether it is interconnected to the Public-Switched Telephone Network
(PSTN) or its successor, and whether it is selling access to networks
supported by universal service.
Consumer protection:
We commend the staff for recognizing State expertise and experience
and the vital role we play in handling consumer complaints. A recent
survey found that in just 20 State commissions, over 230,000 consumer
complaints had been handled in 2004. These complaints are generally
resolved on a one-for-one basis and the majority take only a few weeks
through informal processes.
We are concerned, however, that the discussion draft takes a ``one-
size-fits-all'' approach when it comes to consumer protection
standards, without providing flexibility to the State agencies that
enforce them. This is unfortunate because the same dynamism that brings
exciting new products and services to consumers also produces a host of
new complaints and novel misunderstandings, especially for products
supplanting traditional phone service.
A particular case in point has been the national do-not-call list,
enacted two years ago with great fanfare. Federal agencies, although
they receive thousands of complaints a week, have issued only six (6)
fines since its enactment, and States have provided the bulk of its
enforcement. Even more importantly from the consumer's viewpoint,
telemarketers were quick to exploit a patchwork of loopholes and
``workarounds'' to the federal rules and the calls kept coming. It fell
to a handful of States to say that ``no means no'' could not be
circumvented just because the consumer had made a purchase from the
company 18 months ago or because the call was pre-recorded (which might
actually be more annoying). Without that State flexibility, consumers
would be in a much worse position.
NARUC doesn't object to federal consumer protection standards, but
we do object to an approach that makes those standards a ``ceiling'' on
State action and fails to give those who help consumers the tools,
authority and flexibility they need to get the job done.
Interconnection:
We commend the staff for including interconnection rights between
and among BITS, VOIP and telecom providers. In a networked industry,
fierce competitors will always have to cooperate to operate a seamless
network of networks, but there are frequent perverse incentives for one
carrier or another to frustrate interconnection for anti-competitive
reasons.
We are very concerned, however, that the draft federalizes the
traditional State role of mediating, arbitrating and enforcing those
interconnection agreements. Current law already includes a provision
for the FCC to arbitrate interconnection agreements when the State
commission does not act, but the isolated instances where this has been
necessary have not generally gone well. In one case, a cable company in
the competitive phone business had to spend 3 years and over $2 million
to arbitrate an interconnection dispute at the FCC, even though it was
eventually vindicated on every issue. Sending such disputes to federal
courts or another forum would be even more onerous, with discovery
rules and a multi-year process for resolving disputes that could be
adjudicated in a matter of weeks at a State commission. We are
concerned about the ripple effect that a backlog of such cases would
have on the entire industry, especially when some traditional phone
providers are already seeking to deny interconnection altogether to new
competitors. The ability to interconnect seamlessly into the
traditional phone system is the linchpin of success for many VOIP
services.
Connectivity principles:
We applaud the staff for including proscriptions against blatant
digital protectionism by network owners. Many broadband providers are
under tremendous investor pressure to drive as many customers as
possible to their proprietary voice, video and data products. While
consumers can benefit from ``intelligent networks'' and compelling
proprietary products, we hope the network owners' competitive
strategies will turn on price, quality and features--not impairing
competitors' products or imposing artificial bandwidth limits on
consumers.
Public Safety:
We support the inclusion of an obligation for VOIP providers to
provide 911 / E-911 capabilities to their consumers, and we commend the
staff for preserving State and local assessment authority to continue
supporting and upgrading the PSAP systems, but we are very concerned
that the bill includes no State role to enforce those obligations and
leaves the mediation and arbitration of interconnection to such
facilities at the federal level. As discussed above, federalizing all
the arbitration cases could lead to a dangerous backlog of arbitration
requests. The need for a fast and effective dispute resolution
procedure is even more acute with the 911/E-911 system because the
provider that controls the trunk lines and selective router has a 100%
monopoly over these elements, and competitors need that access to do
business--and it is always a local call.
Universal service:
NARUC supports efforts to more equitably distribute the funding
base of the federal Universal Service Fund (USF) in a technology-
neutral manner, although we believe such efforts must be accommodated
by similar efforts to ensure the long-term sustainability of State
programs. Today, universal service is a jointly shared responsibility
between the States and the federal government, with 26 State programs
distributing about $2 billion--or 28% of the overall national
commitment to universal service. This joint approach benefits both
``net donor'' and ``net recipient'' states because it lessens the
burden on an already sizable federal program and permits another option
when federal disbursement formulas that ``work'' in the aggregate do
not adequately serve a particular state or community.
Our concern is that any expansion of the federal base without a
complementary clarification of State authority could create tremendous
funding gaps. The impact of those gaps would fall disproportionately on
consumers who rely on State programs, and would raise thorny questions
about the equity of federal disbursement formulas.
Conclusion:
In conclusion, we appreciate your thoughtful consideration of our
input and look forward to continuing a fruitful dialogue over the
discussion draft and all the issues that it raises with the members of
the Energy and Commerce Committee. As a next step, we would be pleased
to work with you and your staff on an approach that preserves the
strong points of the discussion draft before us, but is technology
neutral and includes more vigorous and flexible procedures for consumer
protection, interconnection, public safety and universal service.
Mr. Upton. Okay. Thank you. Mr. Haasch, welcome.
STATEMENT OF HARRY HAASCH
Mr. Haasch. Does the microphone work? Hello? Good
afternoon, Chairman Upton. Good afternoon, Chairman Upton, Mr.
Markey, and members of the subcommittee. I am sorry. I don't
think I need two. Take one. My name is Hap Haasch and I am the
executive director of the Community Access Center in Kalamazoo,
Michigan. And I want to thank Chairman Upton for inviting me to
testify today on behalf of the Alliance for Community Media, a
national membership organization representing 3,000 public
education and government access centers across the country.
Local PEG programmers produce 20,000 hours of new
programming per week. That is more new programming than all of
the broadcast networks combined. As you observed, Mr. Chairman,
back in 1999, the Community Access Center in Kalamazoo provides
a diverse programming schedule that can't be found anywhere
else, reflecting a cross-section of society, and offering an
empowering voice to those that may not otherwise have a chance
to be heard. We believe the November 3 staff draft bill however
might directly and substantially threaten the future of PEG
programming throughout the nation. My testimony focuses
primarily on the draft's PEG aspects. However, the Alliance
supports the testimony of Counsel Member Praisner on behalf of
local government organizations heard earlier today.
Let me give you a couple of examples of significant PEG
programming around the country that are replicated in almost
every community. The Kalamazoo Community Access Center, the one
that I manage, we have provided PEG access programming for 25
years. We now average 2,100 hours per month of new programming.
315 hours of that programming are brand new first-run. Just
now, my staff is putting together a 4-camera live production
shoot at the Kalamazoo Public Library, the major fundraiser of
that organization in the community, that will combine staff,
volunteers and interns for a 2-hour production that the local
broadcast networks might give 30 seconds to.
During the 2004 election season, Chicago Access Network
Television, CAN TV, ran 160 hours of local election coverage,
including information on candidates for Presidential,
Senatorial, Congressional and local elections. Media bridges in
Cincinnati, Ohio, cablecast more than 15,000 hours of local
programming, including programming for more than 80 religious
organizations. Cambridge, Massachusetts, produces 50 hours of
live programming per week, shows that include Crime Time,
produced by the Cambridge Police Department. In Southern
Oregon, Rogue Valley TV is the public access organization for 4
cities and 3 counties. They produce Rules of the Road by the
Medford Police Department, a 1-hour monthly live call-in
program primarily on traffic and pedestrian law. Albuquerque,
New Mexico, Sandia Prep School begins its third year of
producing the program Speak Out. It is the students that
produce the program and provide all technical work on the
series that features high school debate, dance, music
performances including the orchestra.
PEG access is only possible if there are adequate funds to
support it. The overwhelming majority of PEG funding comes from
two sources. The first is monetary and in-kind support from
cable operator that is above and beyond the 5-percent franchise
fee. That is a critically important point. The second revenue
stream for PEG access is a contribution by the local
franchising authority of a portion of the 5-percent franchise
fee for PEG. The November 3 House draft bill, however, would
eliminate one of those sources of revenue and substantially
reduce the other in our estimation. The combined elimination of
PEG grants and the substantial reduction of franchise fee
revenue available for PEG would result in a funding reduction
for PEG access that could be nothing short of catastrophic for
some centers across the nation.
Through the cable franchise process on capacity--PEG
capacity issues, local communities, particularly in the renewal
phase of their relationship, have analyzed their PEG access
channel capacity needs and then adjusted their capacity in the
final agreement coming out of renewal. The draft bill, however,
would essentially kept PEG access capacity at current levels.
This would have a particularly harsh effect on communities with
older franchise agreements, many of which might currently have
relatively few channels set aside for PEG. This is in an
environment where there is exponentially increasing channel
capacity on these new systems.
In conclusion, you are right, Mr. Chairman, when you said
that community access centers give a media voice to those who
might otherwise not be heard. Across the nation, PEG access
centers put television in the hands of the people, not as
passive consumers--a word I heard often this afternoon--but as
speakers and information providers. In its current form, the
draft legislation threatens to silence those voices because it
would undermine the continued financial viability of PEG access
centers, particularly those funded above and beyond the
franchise fee. We therefore ask that the draft be revised to
ensure the continued viability of PEG access, the only truly
genuine form of localism and diversity in the television
medium.
The Alliance looks forward to working with you in making
the necessary changes on the legislation to protect PEG access.
Thank you for inviting me.
[The prepared statement of Harry Haasch follows:]
Prepared Statement of Harry ``Hap'' Haasch on Behalf of The Alliance
for Community Media
Good morning, Chairman Upton, Mr. Markey and Members of the
Subcommittee. I am Harry ``Hap'' Haasch, Executive Director of the
Community Access Center serving the cities of Kalamazoo and Parchment
and the townships of Oshtemo, Comstock and Kalamazoo, Michigan. I want
to thank Chairman Upton for inviting me to testify today on behalf of
the Alliance for Community Media, a national membership organization
representing 3,000 public, educational and governmental (``PEG'') cable
television access centers across the nation. Those centers include 1.2
million volunteers and 250,000 community groups and organizations that
provide PEG access television programming in local communities across
the United States. Local PEG programmers produce 20,000 hours of new
programs per week--that's more new programming than all of the
broadcast networks combined. As reported in yesterday's New York Times:
``For every hour of ``Desperate Housewives'' on ABC, the
nation's 3,000 public-access television channels present dozens
of hours of local school board meetings, Little League games
and religious services. Not to mention programs like ``The
Great Grown-Up Spelling Bee,'' a spelling bee for adults that
raises money for the Kalamazoo, Mich., public library . . .''
The Center for Creative Voices recently released a report that
shows that as large group owners control more local broadcast stations
in a market, local programming disappears, replaced by nationally
produced programs that seek to draw larger audiences through more
inflammatory material. Media consolidation furthers this trend. The
report also found, however, that locally controlled programming is more
responsive to community needs.
Congress has traditionally recognized the need to foster localism
in communications. At a time when studies show that less than 0.5% of
programming on commercial television is local public affairs, PEG
centers serve the people in your home town, city, and district.
The November 3 Staff draft bill, however, would directly and
substantially threaten the future of PEG programming throughout the
nation. My testimony focuses only on the draft bill's provisions that
would most directly impact PEG funding and capacity. There are other
provisions in the draft bill that the Alliance and its members find
troubling and we support the testimony of Councilmember Praisner on
behalf of local government organizations on those issues.
i. peg programming--the last redoubt of localism.
The federal Cable Act authorizes local franchising authorities to
require cable operators to set aside capacity on their systems for PEG
use,<SUP>1</SUP> and to require cable operators to provide, over and
above the 5% cable franchise fee, funds for PEG capital equipment and
facilities.<SUP>2</SUP> The amount of PEG capacity that is set aside on
a particular system, as well as the level of funding provided by the
cable operator, is locally determined, based on each community's
determination of its own particular cable-related community needs and
interests.<SUP>3</SUP>
---------------------------------------------------------------------------
\1\ 47 U.S.C. 531.
\2\ 47 U.S.C. 542(g)(2)(C).
\3\ See, 47 U.S.C. 546(a)(4)(B) and 546(c)(1)(d).
---------------------------------------------------------------------------
The PEG provisions of the Cable Act are intended to provide all
members of a community with access to the medium of television. Indeed,
PEG is the only way that average citizens and community groups have
assured access to communicate to their community via television.
Particularly in this era of mass media consolidation, PEG access
ensures that locally-produced programming, of interest to and tailored
to the particular local needs of the community, has an outlet on
television.
PEG access has served that purpose exceedingly well. Among other
things, PEG provides:
The only nmediated coverage Congress Members receive in the home
district. A number of members of Congress use Public Access
channels to communicate directly with their constituents.
Church Outreach--Religious programming represents 20-40% of
programming at most Public Access centers. For the shut-in and
infirm, this is often the only means by which they can
participate in local services.
Coverage of local cultural activities, particularly in smaller
communities that do not receive commercial media attention.
Examples include coverage of local historical, art and music
events.
The ability to maintain the local cultural identities of our towns,
cities and counties. Examples include coverage of local high
school football games, local parades and other civic events.
Local Governmental Programming--Coverage of city/town/county council
meetings, and local police, fire, and public safety
programming.
Local Education Programming--Cablecast of public school and local
college educational programming.
Technical training and jobs. PEG operations employ more people of
color in management and technical positions than in all
commercial media industries combined. PEG centers also provide
vocational training in television camera and production work
for local high school and college students.
News for military families--Army Newswatch is the most-syndicated
program on PEG channels, with carriage on over 300 PEG channels
nationwide.
Let me provide you with some specific examples:
The Kalamazoo Community Access Center (``CAC'') has provided PEG
access programming for 25 years. CAC operates 5 PEG channels providing
2,100 programming hours per month. For 16 years, CAC has provided
``live'' multicamera coverage of the annual United States Tennis
Association's Boys 16 and 18 Championships from the campus of Kalamazoo
College. The coverage is dawntodusk for 11 days, and requires hundred
of volunteer hours in challenging weather conditions. This coverage is
made possible by the availability and use of a fiber institutional
network that links the Kalamazoo College campus and the CAC master
control facility. CAC volunteer Dave Williams helped produce the
``Banned Books ReadOut'' program that featured a selection of wellknown
local personalities reading selections from a number of popular books,
including Ray Bradbury's Fahrenheit 451, Maya Angelou's I Know Why The
Caged Bird Sings, and Mark Twain's classic Huckleberry Finn. The
program was made possible with the cooperation of the ACLU--SW Michigan
Chapter and the Kalamazoo Public Library.
At the Community Television Network in Ann Arbor, Michigan, the
public access center created a program in partnership with National
Kidney Foundation focused on the risks of kidney disease among African
American men and women. African Americans are seven times more likely
to get kidney disease compared to white Americans. The award winning
program has been cablecast on PEG channels throughout the state of
Michigan.
In Illinois, a fledgling statewide public affairs network called
The Illinois Channel originates in part out of Rep Shimkus' District,
bringing C-SPAN type of coverage of state government to nearly 1.3
million Illinois cable homes. The entire distribution network of The
Illinois Channel is due to the existence of PEG channels.
During the 2004 election season, Chicago Access Network Television
(``CAN TV'') ran 160 hours of local election coverage, including
information on candidates for presidential, senatorial, congressional,
and local judicial elections, as well as in-depth interviews by The
Illinois Channel with state district candidates. CAN TV devotes its
resources to local programming with an annual budget that wouldn't buy
a single thirtysecond commercial during the Super Bowl. Those modest
resources are put at risk by this legislation. In an earlier article on
CAN TV's election coverage, the Chicago Tribune reported that,
``Chicago's five access channels bring no small measure of serious
politics, especially involving those large shut out heretofore from
mainstream commercial media, including blacks, Hispanics, and, of
course, Republicans.'' (We are talking about Chicago.)
Media Bridges in Cincinnati and Hamilton County, Ohio, cablecasts
more than 15,000 hours of local programming produced by and for greater
Cincinnatians by organizations like the Contemporary Arts Center, the
Lifecenter Organ Donor Network and Literacy Network of Greater
Cincinnati and more than 80 area religious organizations. According to
a 2003 study, the 96 cents per subscriber per month in PEG access
support that provides the majority of Media Bridges' financial support
is multiplied almost seven times to provide an economic impact in
greater Cincinnati of more than $5.3 million per year. This draft bill
would eliminate that support.
In New Jersey, PEG stations are working with county governments to
incorporate emergency public notification via the over 150 stations
throughout the state. The system will allow communication from any
emergency command location or mobile disaster unit to the communities
effected via any specific town PEG station, a group of stations
covering a specific area, or all the stations covering an entire
county. This system will have the ability to interrupt programming
instantly with text notices that include health hazard notifications,
aid station locations, and evacuation instructions. The notices can
also be removed and/or updated as needed with the same efficiency. This
system will provide a vital and much needed service that will fill the
communications gap that local governments need keep the public informed
and safe in the event of any emergencies from a local level crisis to
supporting national disaster organizations through the use of PEG
stations. This capability will be lost under the draft bill as a result
of the reduced PEG funding and the orphaning of institutional networks
systems.
Community Television of Knoxville, Tennessee (CTV), has served the
residents of Knoxville and Knox County for 30 years. For only $24 per
year, the typical volunteer community producer at CTV receives training
and unlimited use of PEG equipment (including cameras, studios, and
editing equipment) to produce and air their own television programs.
There is no other means by which community residents can find such an
inexpensive way to effectively reach 110,000 community households with
information pertaining to local issues, local resources and matters of
interest to them, from support for victims of Alzheimer's disease and
their families, to foster care, law enforcement, and youth recreation.
Every week, Cambridge (Massachusetts) Community Television produces
50.5 hours of live programs on its BeLive set--shows that include Crime
Time, produced by the Public Information Officer of the Cambridge
Police Department, Bed Time Stories, Muslims Inside and Out, Local
Heroes, and two smoking programs, one against, and one for smokers'
rights. Even though Cambridge is a city of over 100,000 residents, it
is in the shadow of the Boston media market, and the commercial
television stations and daily newspapers consequently do not cover the
local elections. As a result, Cambridge Community Television's election
programming is the only place that residents can tune in to learn more
about local candidates.
In southern Oregon, Rogue Valley TV is the PEG access organization
for four cities and three counties. Since 1999, the Medford Police
Department has produced monthly the Medford Police Department's Rules
of the Road, a one-hour live call-in program primarily on traffic and
pedestrian laws. The police average 30 phone calls per show as Medford
residents jam phone lines waiting to talk with their local police
officers. Without use of institutional network fiber and equipment
purchased with PEG funds, the program would never reach homes in
Medford, Eagle Point and Jackson County, and the phones would be
silent.
Albuquerque, New Mexico's Sandia Prep School just sent 30 students
through Quote . . . Unquote's public access television orientation as
this top academic school begins its third year of ``Speak Out.''
Students produce the program and provide all technical work on the
series that features high school debates, dance and music performances,
including the orchestra. The student producer from an earlier year used
his experience to win a scholarship to a top college. Sandia students
are dependent on equipment purchased from a separate cable franchise
PEG capital fund; their program is sent to subscribers through the
cable system's fiber optic institutional network. Quote . . . Unquote
training, facilitation and programming staff are funded from cable
television franchise fees, which would be substantially reduced by this
legislation.
ii. the november 3 staff draft would substantially reduce, and
ultimately eliminate, funding for peg access.
PEG access is only possible if there are adequate funds to support
it. The overwhelming majority of PEG funding comes from two sources:
(1) monetary and inkind support for PEG capital facilities and
equipment from the cable operator over and above the 5% cable franchise
fee that is required by the local franchise agreement; and (2)
contribution by the local franchising authority of a portion of the 5%
cable franchise fee to PEG.
In Kalamazoo, for example, PEG funding comes from both of those
sources: the Access Center receives 35 cents/month/subscriber for PEG
support and, in addition, the communities contribute 40% of their
franchise fees to the Access Center. In Cincinnati and Hamilton County,
Ohio, the Access Center receives 96 cents/subscriber/month in PEG
support from the cable operator as required by the local franchise
agreement.
The November 3 House Staff draft bill, however, would eliminate one
of those sources of funds to support PEG, and substantially reduce the
other.
A. The Loss of PEG Capital Support Obligations.
Unlike the Cable Act, which allows local franchising authorities to
require a cable operator to provide PEG access capital facilities and
equipment funding over and above the 5% franchise fee, the draft bill
would exempt broadband video service providers from such an
obligation.<SUP>4</SUP> Moreover, the draft bill's PEG provisions place
no obligation on, or ability to require, broadband video service
providers to fund PEG access production facilities and
equipment.<SUP>5</SUP> The result is clear: Unlike incumbent cable
operators, broadband video service providers under the draft bill
cannot be required to provide the local community with any monetary
support for PEG beyond the 5% franchise fee. That would also mean that,
over time, the incumbent cable operator would no longer provide such
PEG support, as it would no doubt refuse to continue to incur a cost
from which its broadband video service provider competition has been
immunized. Alternatively, the incumbent cable operator would eventually
transform itself into a broadband video service provider, thereby
freeing itself directly from its PEG support obligations.
---------------------------------------------------------------------------
\4\ Compare 47 U.S.C. 542(g)(2)(C) with Draft Bill, 2(a)(9)
(PEG access grants not excluded from ``franchise fee'' definition).
\5\ See Draft Bill, 304(b).
---------------------------------------------------------------------------
B. A Reduced Franchise Fee Revenue Base Would Reduce Local Franchising
Authority Financial Support for PEG.
The draft bill, unlike the Cable Act,<SUP>6</SUP> restricts the
``gross revenue'' base for the 5% franchise fee to revenue ``collected
from subscribers.'' <SUP>7</SUP> As a result, non-subscriber revenues,
from sources such as advertising and home shopping channels, would be
excluded from the franchise fee revenue base under the draft bill. That
would represent anywhere from a 10% to 15% reduction in the franchise
fees that local governments currently receive under the Cable Act. And
non-subscriber revenues--especially advertising revenues--are one of
the fastest growing revenue streams in the current cable franchise fee
revenue base. In those communities, like Kalamazoo and many others
elsewhere, where the local government contributes a portion of its
franchise fee revenues to fund PEG access operations, the reduced
franchise fees caused by the draft bill would result in a substantial
reduction in the funds that PEG access centers currently receive from
cable franchise fees.
---------------------------------------------------------------------------
\6\ 47 U.S.C. 542(b).
\7\ Draft Bill, 303(d)(3).
---------------------------------------------------------------------------
The combined elimination of PEG grants and the substantial
reduction of franchise fee revenue available for PEG use that would
occur under the draft bill would result in a funding reduction for PEG
access that would be nothing short of catastrophic for many, if not
most, PEG access centers across the nation.
iii. the november 3 staff draft would limit peg capacity to current
levels, thereby depriving communities of the ability to tailor peg
capacity to changing, and often growing, community needs.
Under the Cable Act, the number of channels set aside for PEG use
is determined individually by each local community based on its
particular PEG needs and interests. Perhaps more importantly for the
discussion here, the current Cable Act allows local communities,
through the cable franchise renewal process, to reassess their PEG
needs periodically, and to increase the channel capacity set aside for
PEG where demand warrants.
As you might expect, the number of PEG channels set aside varies
widely from community to community. This is precisely the sort of local
self-determination and flexibility that one would expect--and that
should be cherished--if the localism that PEG programming embodies is
to survive. The draft bill, however, would short-circuit this process.
It would essentially cap PEG access capacity at current
levels.<SUP>8</SUP> That would mean that local communities would be
locked into current PEG capacity limits--limits that were often set
years ago when the incumbent cable operator's franchise was last
renewed.
---------------------------------------------------------------------------
\8\ Draft Bill, 304(b)(1)(A). It might be argued that
304(b)(1)(A) allows for PEG capacity growth, since it requires the
broadband video service provider to provide PEG capacity comparable to
the incumbent cable operator, and the incumbent operator's PEG capacity
obligations might be increased in subsequent cable franchise renewal
proceedings. But that would not likely occur if the draft bill became
law because: (1) the incumbent cable operator would probably no longer
be willing to agree to increase PEG capacity without an effective
franchise process assurance that the broadband video service provider
has to match that increase; and (2) the incumbent operator would, over
time, likely become a broadband video service provider itself and thus
become immune from the Cable Act renewal process.
---------------------------------------------------------------------------
But there is no reason to suppose that PEG capacity needs are
static. In fact, those needs typically grow over time, as the local
community's interest in PEG programming grows, and the volume of PEG
programming grows.
The draft bill's effective ceiling on PEG access capacity would
have a particularly harsh effect on communities with older franchise
agreements, many of which may currently have relatively few channels
set aside for PEG. The draft bill would deprive these communities of
the ability to increase PEG access capacity and thus forever sentence
them to inadequate PEG capacity to meet their future needs.
conclusion
Across the nation, PEG access centers put television in the hands
of the people, not as passive consumers, but as speakers and
information providers. As Chairman Upton observed back in 1999:
``The Community Access Center provides a diverse programming
schedule that can't be found anywhere else, reflecting a cross-
section of society and offering an empowering media voice to
those who may otherwise not have a chance to be heard.''
In its current form, the draft legislation threatens to silence
these voices because it would undermine the continued financial
viability of all PEG centers nationwide. We therefore ask that the
draft be revised to ensure the continued viability of PEG access, the
only truly genuine form of localism and diversity in the television
medium. The Alliance looks forward to working with you in making the
necessary changes to the legislation.
Thank you for the opportunity to speak to you today, and I would be
happy to answer any questions you may have.
Mr. Upton. You bet. Thank you. Thank you for being here.
Mr. Kimmelman, welcome back.
STATEMENT OF GENE KIMMELMAN
Mr. Kimmelman. Thank you, Mr. Chairman, members of the
subcommittee. On behalf of Consumers Union, the print and
online publisher of Consumer Reports, we once again thank you
for inviting us to discuss the staff draft.
I would urge you to think about this legislative process as
you go forward with an eye toward what is going on in the
marketplace and what consumers are experiencing. We have a
cable company in most communities; we have a telephone company
in most communities; and we have the hope for more players
coming in. And you will note that just last week, one of the
major new consolidated players that reduced the number of cell
phone providers we have, Sprint-Nextel, which was going to be a
new broadband third choice for consumers, decided to cut a 20-
year contract with 4 major cable companies to offer its
broadband services in conjunction with one of the two dominant
players. What we see happening over and over again is that it
is the two dominant players, the Telco and the cable company,
who still reign supreme. And something is particularly wrong in
the marketplace when, on order to get voice over the Internet
competitively, you have to go SBC or Verizon and you have to
buy their DSL service and their voice service, whether switched
or VoIP, before you can pick a competitor. And something is
also wrong in the marketplace when in order to get a high-speed
Internet service over cable, you have to go to the cable
company and use its high-speed service to pick another--if you
can even pick another. And something is really wrong in the
marketplace with the explosion of all the video programming out
there when the consumer can't pick the channels he or she wants
to get, has to take the package of channels offered by the
cable company, or the satellite company, or the telephone
company. Can't eliminate payment for channels the consumer
finds distasteful and inappropriate because it is bundled by
the dominant video provider.
Now, the staff draft does a number of important positive
things, but unfortunately it doesn't address these critical
problems, and may create significant new problems just like
these for the Internet by putting too much power in the hands
of broadband video providers, whether they be a former cable
company or former telephone company, to control what consumers
get, how they get it, what applications, how they are packaged,
what you pay for them, with inadequate public enforcement
mechanisms.
Now, clearly on the positive side of here, what you have
done is enormously important in allowing communities to build
their own broadband open networks. This addition to the
marketplace would bring, we hope, expanded choices, greater
diversity, and opportunities for minority-owned and controlled
content, if cities choose to take advantage of it. And clearly
it is critical that you are opening the door and speeding up
the process for video competition from telephone companies.
That clearly will benefit consumers if you address this problem
of how programming is packaged. That requires further
intervention, unfortunately, than what the staff draft
currently proposes.
But in opening the door to video competitions, so critical
for consumers who see cable rates continue to go up almost 3
times the rate of inflation, as Mr. Ellis pointed out, it is
absolutely essential to make sure that the wonderful open
attributes of the Internet are not closed off at the same time.
And, unfortunately, some critical definitions, some critical
matters where there are discrimination issues and issues of how
services are offered, are not adequately defined in the draft,
and are left to private negotiation rather than public
obligation. We are concerned that you are effectively
eliminating reasonable prices, terms and conditions, provisions
from Title I and Title II of the Communications Act.
And, finally, I would like to point out that when it comes
to Federalizing consumer protections, I urge you to think about
this really carefully. Imagine what happens when a consumer
complains about a service they never requested, which you have
covered under your consumer protection provisions. They
complain about--do you really want them to have to go to the
FCC to have to rely on an agency that I don't believe anyone on
this committee has ever thought does its job very effectively,
efficiently and certainly not in a timely fashion? Is that a
meaningful way of resolving a complaint about something you
didn't request? And then even worse, what if your bill is
inaccurate or you think your bill is inaccurate? I am sure you
have got many constituents who feel this way quite often. Under
the staff draft, not only can they not go to their State
regulators or local officials, but the FCC isn't even empowered
to look at that issue. I think----
Mr. Upton. Just to interrupt you. I will stop. I think we
have written this so that they can go to the PUCs to do that,
to enforce the Law.
Mr. Kimmelman. The moment the company says we disagree with
that, it is back at the FCC. There is nothing you can do. But
on a bill that is inaccurate, it is not even covered by the
provision. I mean, I would just hope----
Mr. Upton. You can clarify that.
Mr. Kimmelman. Okay. I would hope you would want to because
as much as it is important to streamline the process here of
new entry and new players, it is absolutely critical for
consumers to have a place to go that is convenient and that
will deal in a timely fashion with their concerns.
In conclusion, Mr. Chairman, we think that there is much
work that needs to be done on this legislation, but there are
important issues that you are addressing. And we hope that you
will continue to work with all outside players to try to craft
legislation that both brings competition, brings us more video
players, more choices in the marketplace, but does not undercut
critical principles of Internet access. Thank you.
[The prepared statement of Gene Kimmelman follows:]
Prepared Statement of Gene Kimmelman, Senior Director of Public Policy
and Advocacy, Consumers Union
Consumers Union <SUP>1</SUP> and Consumer Federation of America
<SUP>2</SUP> appreciate the opportunity to testify on the broadband
policy discussion draft. We are grateful to Chairman Barton and members
of this Subcommittee for their leadership on these important consumer
issues.
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\1\ Consumers Union is a nonprofit membership organization
chartered in 1936 under the laws of the state of New York to Provide
consumers with information, education and counsel about good, services,
health and personal finance, and to initiate and cooperate with
individual and group efforts to maintain and enhance the quality of
life for consumers. Consumers Union's income is solely derived from the
sale of Consumer Reports, its other publications and from noncommercial
contributions, grants and fees. In addition to reports on Consumers
Union's own product testing, Consumer Reports with more than 5 million
paid circulation, regularly, carries articles on health, product
safety, marketplace economics and legislative, judicial and regulatory
actions which affect consumer welfare. Consumers Union's publications
carry no advertising and receive no commercial support.
\2\ The Consumer Federation of America is the nation's largest
consumer advocacy group, composed of over 280 state and local
affiliates representing consumer, senior, citizen, low-income, labor,
farm, public power an cooperative organizations, with more than 50
million individual members.
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For decades, consumers have suffered under monopolistic cable
pricing that has resulted in skyrocketing cable bills and fewer
consumer choices. And despite the promise of more competition in
wireless and wire line phone services, consumers have seen more
consolidation and fewer marketplace choices. But the advent of
broadband now offers tremendous opportunity to inject new and
potentially vigorous competition into the telecommunications
marketplace that has become increasingly concentrated over the past
decade.
We welcome the Committee's interest in fostering greater consumer
choice by allowing communities to offer affordable broadband services
to their residents. The draft provision prohibiting preemption of
municipal broadband services helps ensure that communities do not face
additional roadblocks to affordable broadband access for their
residents.
If communities build open broadband systems, consumers will no
longer be held hostage to the dominant phone or cable provider--they
should be able to get video, voice and Internet services from many
sources. Broadband, whether offered by the municipality or other
provider, can break the anticompetitive spiral by loosening the
stranglehold that dominant telephone and cable monopolies have enjoyed
for decades. But in order for that opportunity to be realized,
broadband policies must facilitate the entrance of new or alternative
market players that offer voice, video and data services widely
available from cable, telephone companies or any other delivery system.
However, given the enormous consolidation in wire line and wireless
communications services, this draft fails to deliver the policies
necessary to ensure that consumers will receive meaningful growth in
price competition in what has become the most important
telecommunications service--broadband connectivity. The draft's failure
to confront the last mile bottlenecks created by the dominant
providers' existing control over competition may in fact foreclose
opportunities for future meaningful competition in broadband.
Worse, the draft takes a step in the opposite direction, relieving
incumbent monopolists of key obligations while giving them
unprecedented ability to restrain broadband competition, and therefore
phone and video competition, offered by new market entrants.
Technological change must not result in the abandonment of fundamental
values embraced over 70 years of telecommunications policy--values like
nondiscrimination, participation in decision making, and protection of
both new market players and consumers from abuse.
This draft hands over unprecedented power to broadband providers to
discriminate among potential competitors and prevent their own
customers from freely accessing content on the Internet and to use
applications and devices of their choice. As it purports to promote
competition in voice, video and data services, it virtually ensures
that the two dominant incumbents will compete at most with each other
while squeezing out third party competitors. It preempts the ability of
localities to require new video entrants to build out their services to
all consumers without imposing any national requirements for true
competition. It federalizes all decisions on consumer protection while
unfairly limiting the types of standards the Federal Communications
Commission is authorized to establish. It precludes enforcement of even
those limited standards by the states and gives consumers the
unsatisfactory remedy of a drawn-out federal complaint resolution
process. Consumers will be left with no where to turn and no remedy for
relief.
In short, the American consumer is being asked to give up a great
deal in exchange for another promise of competition at some distant
point in the future. Consumers have had their pockets picked too many
times to be fooled again. Twenty years of broken promises make us
skeptical that the sacrifices being asked of the public by this
discussion draft will ever be offset by competitively driven reductions
in prices or improvements in service quality. History tells a different
story: one of increasing concentration, skyrocketing cable bills, and
bigger bundles of expensive services forced on consumers by both the
cable and telephone industries.
Our specific comments on the draft follow:
nondiscrimination & network neutrality
The promise of broadband is its ability not only to provide
consumers with unlimited access to diverse sources of information and
online services, but also to offer competitive alternatives to dominant
telephone and video services providers through voice and video over
Internet. But that competition will be stifled if broadband Internet
transmission service providers are allowed to effectively block
consumer access to both content and competitive services that use the
provider's service. Unfortunately, the discussion draft, in its current
form, does not prevent that.
Section 104 codifies the principle that broadband providers should
operate their networks in a neutral manner but simultaneously provides
extensive exceptions, inviting network operators to discriminate
against content, applications or devices that they do not own or
control. The draft opens a wide door to discrimination.
The draft bill allows broadband Internet transmission service
(BITS) providers to discriminate against content, devices and
applications they do not own so long as they can justify such
discrimination under the guise of network management. This loophole is
expanded for broadband video services that integrate Internet
capabilities or those who provide enhanced service quality by declaring
that they ``may not unreasonably'' impair, interfere, restrict or limit
applications or services, but offers no standard for what is
``unreasonable'' and contemplates no rulemaking to do so. There is a
significant danger that ``reasonable'' discrimination may be nothing
more than a desire to maximize revenue by blocking competition.
Processes to resolve discrimination complaints allow BITS providers to
block content or restrict use of devices and applications as complaints
are resolved. This foot-dragging strategy is the model that the
industry used to strangle head-to-head competition in the past decade.
Giving network operators the power to dictate services opens the
door to the ``cablization'' of the Internet. Cable and telephone
company giants are encouraged by this bill to bundle more services
together in take-it-or-leave-it packages and to make it harder, not
easier, for competing communications service providers and Internet
applications developers or service providers to reach the public. Both
cable and local telephone industries have a long history of using their
market power to stifle competition and undermine consumer choice. In
the past decade, the cable industry has inflated monthly cable bills by
more than 60 percent <SUP>3</SUP> and forced consumers to pay twice for
Internet service if they want an Internet service provider other than
the cable owned entity. The result has been thousands of Internet
service providers out of business.
---------------------------------------------------------------------------
\3\ Bureau of Labor Statistics, Consumer Price Index (November
2005). From 1996 until September 2005, CPI increased 28.7% while cable
prices rose 63.8%, 2.3 times faster than inflation.
---------------------------------------------------------------------------
Telephone companies have followed a similar path with respect to
local competition. Dragging their feet on market opening, they made it
virtually impossible for competing local exchange carriers to get into
the market. Once the Bells were let back into long distance, they
slammed the door on competition and bought up much of what remained of
the competitive local exchange carrier industry. At the same time, they
have tied their high-speed Internet service (DSL) to voice, much like
the cable operators tied Internet service to their high-speed
communications. This duopoly dribbles out bandwidth increasingly in
bundles that are unaffordable for most Americans. As a result, over the
past half decade, America has fallen from third to sixteenth in
penetration of high speed Internet access <SUP>4</SUP> and what we call
high speed is vastly slower than what the rest of the world does.
---------------------------------------------------------------------------
\4\ Organization for Economic Co-operation and Development (OECD),
OECD Broadband Statistics, December 2004. Available at http://
www.oecd.org/document/60/0,2340,en_2649_34225_2496764_1_1_1_1,00.html ;
International Telecommunications Union, Broadband Statistics, April 13,
2005. Available at http://www.itu.int/osg/spu/newslog/
ITUs+New+Broadband+Statistics+
For+1+January+2005.aspx
---------------------------------------------------------------------------
Giving the duopoly more power to control the consumer and undermine
competition will not solve the problem, it will make it worse and it
will have the added cost of further undermining innovation in broadband
services. Learning a lesson from the cable operators, who have been
free to close their network for years, the CEO of SBC, the nation's
largest telephone company, has already declared his intention to use
the new-found freedom to discriminate against and charge fees of
Internet applications and service providers.<SUP>5</SUP> By imposing
limits on download speeds and declaring certain applications
unacceptable, the cable operators sent a strong signal that they would
control the services that flowed through the cable wires. Innovators
abandoned the space and innovation moved abroad. With the telephone
companies now poised to pursue the same anticompetitive, anti-
innovation strategy, a long shadow has been cast over the Internet
applications market in America.
---------------------------------------------------------------------------
\5\ ``At SBC, It's All About `Scale and Scope,' '' Business Week,
November 7, 2005, http://www.businessweek.com/magazine/content/05--45/
b3958092.htm
---------------------------------------------------------------------------
The importance of ensuring nondiscrimination in Internet access and
traffic cannot be underestimated. It's important to understand that the
Internet only grew and thrived because of two mandates of openness.
First, the Internet protocols were developed as open protocols under
government direction. The agencies that operated the Internet required
the interconnecting networks to adopt and abide by these open
protocols. Second, the underlying transmission medium, the telephone
network, was required by law and rule to be operated in a
nondiscriminatory manner under sections 201 and 202 of the 1934
Communications Act <SUP>6</SUP>, which make it unlawful for a provider
to impose unjust and unreasonable rates, terms and conditions on other
providers. This draft bill effectively repeals those provisions by
making them inapplicable to BITS and BITS providers and yet provides
the Commission with no authority to promulgate rules or standards for
non-discrimination on networks. Moreover, the minimal interconnection
obligations for BITS and BITS providers included in the bill are not
even subject to a standard that requires interconnection based on a
public interest standard. Instead, interconnection agreements are left
solely to the discretion of the dominant network provider and the
unaffiliated provider seeking interconnection, with no standards for
what they must include and what is prohibited.
---------------------------------------------------------------------------
\6\ 47 U.S.C. 201-202.
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Strong, enforceable nondiscrimination provisions are essential to
continued growth and competition in not just broadband service, but
also for continued innovation in Internet content, services, and
applications. The draft bill not only fails to provide standards for
what impairment, interference or blocking is considered
``unreasonable,'' it provides no meaningful remedy for those
unaffiliated providers whose applications, services or content is
restricted by a BITS provider. And it places the burden of proving that
interference is ``unreasonable'' squarely upon those whose rights are
violated--businesses with far less power than the dominant incumbent
and consumers, who are entirely powerless under the bill's complaint
procedure.
Though the draft gives the Federal Communications Commission the
authority to order continuation of service while a discrimination
complaint is being resolved, the authority is discretionary. More
likely, the dominant incumbent will block the applications, content or
device provider during the months-long complaint investigation and
resolution process, undermining the viability of the competitive
business. Because of the history of network discrimination, the draft
should place the burden of proving that blocking, impairment or
interference content, services or applications is reasonable by
requiring the BITS provider to bring a complaint to the Commission and
mandate service continuation until permission to impair is provided.
Until that case is effectively made, the services, content and
applications should not be interfered with.
Additionally, considering that broadband networks will become the
major means of communications in this country, the Committee should
retain a strong public interest standard for interconnection agreements
and authority for the Commission to mandate interconnection when it is
in the public interest.
national franchising
While we applaud the goal of expanding competition to cable
monopolies, if Congress establishes a national franchise for
competitive video services in order to foster more competition, it must
also provide for strong, uniform, minimum national standards that meet
the needs of communities. In particular, this must include provisions
to meet community programming needs, ensure build-out and prevent
redlining--all negotiating authorities previously provided to
localities but effectively eliminated by the draft. If communities are
forced to forfeit their rights to ensure fair treatment of and service
to their residents, this bill must also establish adequate national
standards in place of those local rights. Without these requirements,
the promise of more competition will be just another empty one.
In the absence of explicit requirements that the Bell-entrants
build out and make their services available to all consumers in a local
franchise area, we fear competitive video services will come only to
``high-value'' consumers--those capable of paying for the full bundle
of services that the Bells wish to offer. The favoring of upscale
consumers to the exclusion of low-income, minority and ethnic groups in
the provision of consumer services has long been a concern in the
communications industry and is of growing concern in advanced
telecommunications services given the importance of broadband access to
functioning in today's society. The anti-redlining provision (Section
304(c)) is a symbolic step in the right direction to ensure that low-
income communities--those most in need of price relief that broadband
competition can bring--are not excluded by broadband video service
providers.
Unfortunately, by providing sole enforcement power to the
Commission and preempting local and state authorities in this area, we
have strong concerns that the prohibition will be largely meaningless.
The Commission will be charged with monitoring compliance in
potentially thousands of communities, with no new resources dedicated
to that enforcement and no adequate date on which to base its
determinations. Moreover, the enforcement provision lacks specificity
both as to how the Commission will monitor compliance by broadband
video service providers and how quickly it will take action to remedy
nonperformance by providers. We urge your consideration of shared or
sequential monitoring and enforcement of anti-redlining provisions by
the Commission, the states and localities. And it is unclear whether
discrimination based on race, ethnicity or other exclusions based on a
``lack of projected demand for service'' would be allowed under the
draft legislation.
However, even enforceable anti-redlining provisions may be
incapable of ensuring service to low-income populations so long as the
burden lies with authorities to prove that income is the sole reason
that service has been withheld as provided for in the draft. The
combination of the lack of build-out requirements for new video service
providers, together with relatively weak anti-redlining enforcement and
the absence of meaningful local franchise negotiating authority, will
prevent communities from taking action to ensure that all of their
residents enjoy the benefits of competition.
If legislation is to forfeit local franchising authority rights, it
should also establish national mandatory minimum build-out requirements
for new market entrants in the local franchise area in which they
intend to provide service. If timely build-out is not required, then
the Committee should require new entrants to provide financial
resources to local communities or states for use in fostering
alternative means of ensuring broadband competition and service to the
entire community rather than to high-value customers alone. Those
resources could be used to establish community broadband networks,
competitive commercial services to areas underserved by the new
entrant, or other means of assistance to help low-income consumers
access advanced telecommunications services at affordable prices.
Though Section 409 respects the rights of communities to build their
own networks, it eliminates only one barrier--preemption. It provides
no resources to assure municipalities can establish these networks.
This is particularly a problem for communities with large low-income
populations.
application of video regulations to broadband video service providers
Although the draft appears to apply current pro-competitive video
rules (e.g. access to programming, ownership limits, must-carry) to new
broadband video service providers, it opens the door to eliminating
important statutory and regulatory protections within four years
without a demonstration that such rules no longer serve the public
interest. By allowing the few requirements Congress imposed on cable
monopolies to promote competition--which enabled the satellite industry
to grow and broadcasters to deliver quality local television
programming--to expire without a thorough demonstration that all public
benefits derived from these rules can clearly be attained through
market forces, the draft would undermine some of the most important
avenues for achieving diverse and competitive sources of television
news and information. There is simply no reason to let the Commission
eliminate these important pillars of public safety without Congress
first initiating such modifications through targeted legislation.
consumer protection
The bill's preemption of state regulation over BITS, VOIP, and
broadband video services is a significant concern. States are
frequently the first line of defense for consumers in resolving
complaints about fraud, inadequate service, pricing and other anti-
consumer behavior. Instead the bill requires the Commission to
establish national consumer protection standards for these services. As
unsettling as federal preemption of all state regulation or enforcement
is, equally troubling is the omission in this most recent draft of
several directives for Commission standards included in earlier
iterations of this legislation. Omitted provisions include limitations
on early termination fees, requirements for customer service standards
and the maintenance of consumer complaint records. If the Commission is
allowed to preempt state regulation and enforcement, it must be
required to issue comprehensive standards that fully protect consumers
rather than be limited to the minimal mandates in the bill.
In addition, because the draft allows telecommunications companies
to redefine themselves as BITS, BITS providers, or broadband video
service providers, they are able to skirt existing state and local
consumer protection standards for traditional services.
By preempting states from developing their own consumer protection
standards and then simultaneously preventing their final enforcement of
national standards, the bill significantly weakens consumer
protections. States will have only the ability to issue compliance
orders when providers violate Commission standards. They can take no
enforcement action of their own, raising serious concerns about the
timeliness and resolution of consumer protection violations given
Commission resources. And if a consumer complaint does not clearly fall
under a national standard, consumers will be forced to wait for
subsequent Commission action in order to resolve their problems.
Finally, the complaint process envisioned by the draft threatens to
leave consumers, municipalities and states without resolution of
concerns for many months as the Commission forwards the complaint to
the offending party, awaits an answer, investigates the complaint and
then mediates or arbitrates the issue. At a minimum, any legislation
should provide states with the ability to enforce federal standards and
allow states the flexibility to protect consumers against new forms of
abuse while awaiting Commission action to formulate final rules.
rights of municipalities to provide broadband networks
We offer our strong and unqualified support for Section 409, which
prohibits state preemption of municipal broadband networks--a critical
component of any legislative package that seeks to increase consumer
access to advanced telecommunications services. The provision is
essential to any legislation that seeks to foster competition in data,
video and voice services, and expand affordable high-speed Internet
access to all Americans.
Hundreds of communities have responded to the lack of affordable
broadband access by creating their own networks through public-private
partnerships, offering new opportunities for entrepreneurs. Community
broadband networks offer an important option for communities in which
broadband services reach only certain areas or are offered at prices
out of reach for many consumers. Equally important, the mere
possibility that a community may develop a broadband network helps
discipline the marketplace.
Efforts to prohibit these community networks stifle competition
across a range of telecommunications services, stall local economic
development efforts, and foreclose new educational opportunities.
Section 409 of the draft ensures that communities that want to foster
broadband access are not precluded from doing so.
summary
We applaud the Committee's efforts to modernize regulation to
foster broadband competition, technological innovation and adoption of
high-speed Internet. Unfortunately, the approach of this draft heads in
exactly the opposite direction: it will hamper competition, stifle
innovation, and do little to promote ubiquitous affordable access to
advanced services. We look forward to working with you to address these
issues as the Committee continues its work.
Mr. Upton. Thank you. Mr. Wiginton?
STATEMENT OF JOEL K. WIGINTON
Mr. Wiginton. Thank you, Chairman Upton, for inviting us to
testify. My name is Joel Wiginton. I am Vice President and
Senior Counsel at Sony Electronics for Government Affairs. It
is about almost 6 hours after this hearing started, so rather
than read my testimony verbatim, I will just give you the 5 top
highlights of my testimony. We are a leading consumer
electronics manufacturer, including the manufacture of
televisions, from soup to nuts, in Pennsylvania, and personal
computers in San Diego. There are five main points.
My first is that our industry, and consumers in general,
will substantially benefit from a truly competitive video
service market. In particular, we are encouraged by the
competition potentially offered by new entrants such as the
ILECs, and we want to applaud the committee for your efforts to
realize this competition.
Second, and perhaps the most important for our industry and
consumer electronics consumers, is that we need to truly
realize right of attachment as envisioned by Section 629 of the
Telecommunications Act. We were pleased that the draft bill
extends the principles of 629 to broadband video service
providers, but what we really need is an explicit right to
attach. Absent an explicit right, there will be little
competition for consumer electronics devices that attach to the
networks, and consumers will have little choices as well
because service providers can use their monopoly power over
that network to control the devices that attach to that
network, and how consumers can use those devices.
Consumer choice will suffer for three main reasons. One,
there will be little competition for consumer prices for
devices that attach to the network. Two, there will be little
competition for features and functions for devices that attach
to the network. And, three, there will be little innovation and
little incentive for consumer electronics device manufacturers
to create new consumer-friendly products that attach to the
network.
Our third point, we are quite pleased that the draft bill
applies the net neutrality principles to the broadband Internet
access services. We want to point out though that if these
principles are violated, we want to ensure that there is
meaningful enforcement of these principles by the Federal
Communications Commission.
Fourth, we do have some concerns with the mandatory 4-year
sunset review provision of the bill. As Mr. Stearns said in his
opening statement, what we want to do with this bill is create
regulatory certainty. And while this provision will ensure
employment for myself--lawyers and lobbyists like myself in
perpetuity--it really does do the exact opposite for people in
my industry. It creates a systemic intolerable uncertainty for
the consumer electronic industry.
And, finally, while we very much support the spirit of the
bill and its attempt to create meaningful access for persons
with disabilities to broadband services, we do have some
concerns with the precise language of the bill. That said, we
think that a compromise is easily obtainable, and we want to
work with the committee and members of the disability community
to create a provision that effectively creates access for
persons with disability.
Thank you very much, and we look forward to any questions.
[The prepared statement of Joel K. Wiginton follows:]
Prepared Statement of Joel K. Wiginton, Vice President and Senior
Counsel, Sony Electronics Inc
introduction
Chairman Upton and Ranking Member Markey, my name is Joel Wiginton,
and I am Vice President and Senior Counsel for Government Affairs at
Sony Electronics Inc. We are a leading manufacturer of consumer
electronics devices, including televisions, DVD players, and personal
computers. My company appreciates the opportunity to express its views
on the staff discussion draft creating a statutory framework for
Internet protocol and broadband services.
Over the past several years, consumers nationwide have benefited
from a revolution in consumer technology--a revolution that has allowed
for an ever-increasing array of products to interconnect and access the
power of IP-enabled services through the Internet. Consumers enjoy
``on-demand'' access to all types of content using a vast array of
consumer electronics devices. This revolution has fueled the U.S.
economy and helped to maintain our country's leadership in innovation
and entrepreneurship.
Policymakers have long recognized the value of unfettered access to
communication services. FCC regulation in the 1970s and 1980s fostered
the growth of the Internet by prohibiting telephone companies from
preventing the offering of ``enhanced services'' and allowing consumers
to attach their own devices to the network. Further, Congress
recognized the importance of consumer choice when it enacted, in 1992,
Section 624A of the Communications Act mandating compatibility between
consumer electronics and cable television systems and, in 1996, Section
629 mandating the commercial availability of navigation devices
connecting to multichannel video programming systems.
promoting market-based competition and preserving the marketplace for
edge technologies
As an industry, we are excited about the potential for new,
competing broadband services, including new video programming services.
We believe that these new services should be able to flourish and not
be saddled with burdensome and inappropriate legacy regulations. At the
same, we believe that the success of broadband services depends on
preserving the existing paradigm between consumer electronics
manufacturers, service providers, network operators, content
developers, and the government. This paradigm includes a commitment to
open and unfettered consumer access to content, services and
applications, and protecting consumers' ability to connect devices of
their choice.
High-speed broadband networks offer a platform for innovation that
will thrive if application developers, device manufacturers, and
network providers are free to differentiate their offerings and invest
in new technologies without restrictions imposed by other industry
players. We believe, therefore, that innovation will flourish only if
device manufacturers have certainty that their products will be able to
connect to IP networks and broadband services.
If this freedom is not preserved in the broadband world, then
network service providers will be able to dictate CE product design and
functionality and to favor equipment of their own design and making
over equipment provided by unaffiliated parties in the competitive
marketplace. Using proprietary standards and restrictive licensing
terms, service providers will be able to control the consumer
experience, determining what devices consumers can use and how they use
them. If service providers exercise this ability, the retail
marketplace for ``edge network'' technologies like TiVo and portable
video players, and the incentive to create new technologies, will no
longer exist.
Although we are hopeful that detailed regulations will not be as
necessary with respect to emerging technologies as has been the case in
the past (for example, with cable television), we believe that it is
essential for Congress to direct and empower the FCC to ensure that
consumer devices that can attach to broadband services will become
commercially available. Consumers ultimately will benefit from the
resulting array of choices available to them.
enforcement mechanisms for ``net neutrality'' principles should be
included in the legislation.
We also would like to express our continued support for applying
``net neutrality'' principles to broadband Internet access services.
Section 104 in the draft bill applies these principles to such
services. However, we believe that to ensure adherence to these
principles, swift and appropriate action must be taken if they are
violated. Additionally, we hope that service providers do not take
unjust advantage of the exemptions in Section 104 to avoid complying
with the principles.
ensuring the commercial availability of devices that attach to
broadband video services
As discussed in the introduction, in 1996 Congress recognized the
importance of consumer choice when it enacted Section 629 mandating the
commercial availability of navigation devices connecting to
multichannel video programming systems. We are pleased that the current
draft bill directs the Federal Communications Commission to develop
comparable regulations to apply to broadband video services providers.
As the Commission develops these regulations, we believe that it is
vital for such regulations to include an explicit ``right to attach''
competitive devices. The language set forth in Section 624A and Section
629 does not include a clear right to attach. We ask, therefore, that
the FCC be directed to include in its regulations an explicit right to
attach commercially available devices to broadband video services so
long as they do not harm the network or enable theft of service.
Further, licenses for these technologies that allow the attachment
of devices to broadband video services should not impose unrelated or
unnecessary burdens on licensees, such as prohibiting designing the
same device to attach to a separate broadband Internet service if the
consumer has subscribed to such a separate service. We respectfully
request the addition of amendatory language prohibiting broadband video
service providers from imposing such limitations in their licenses.
In addition, to ensure that the current ``two-way plug and play''
negotiations among cable providers and CE manufacturers are not stalled
or undermined, we ask that language be added to the bill stating that
until the Commission enacts new regulations, the current regulations
implementing Sections 624A and 629 for cable operators shall continue
to apply to covered multichannel video providers (cable) even after
they qualify to be treated as broadband video service providers.
access to persons with disabilities
The consumer electronics industry supports the goal of ensuring
that persons with disabilities have access to products that attach to
broadband services. However, we believe that the current draft bill,
instead of working toward that goal, will work against it.
The draft bill widens the scope of existing accessibility laws by
including any and all devices used to access broadband Internet, voice
and video service. It also creates a new undue burden standard that
would require every manufacturer, on a case by case and potentially a
product by product basis, to prove an undue burden. The uncertainty,
compliance, and potential litigation costs would greatly impact
manufacturers' ability to develop new, innovative devices that attach
to broadband services.
Current telecommunications law (Section 255) stipulates that
manufacturers must provide products that are ``accessible to and
useable by persons with disabilities, where readily achievable.'' The
``readily achievable'' standard is defined as ``easily accomplishable
and able to be carried out without much difficulty or expense.'' The
current committee draft legislation defines an ``undue burden'' as
meaning ``significant difficulty or expense.'' Thus, although the
factors used to evaluate whether a feature or function is ``readily
achievable'' or an ``undue burden'' are similar, the analysis could
result in a radically different level of obligation for manufacturers.
This difference could be critical for the ability of manufacturers
to provide products with a variety of different features and functions
that meet the needs of different markets. Under current law,
manufacturers of telecommunications consumer products have been able to
provide products with bare-bones capabilities at low cost and other
products with enhanced capabilities at a fair market price. CEA is
concerned that the change to an ``undue burden'' standard would result
in a regulatory environment that would require every product be
equipped with any feature that a single high-end product might be able
to employ. The unfortunate result would be that manufacturers could
become fearful to innovate in accessibility features, and hold back
innovations that would otherwise have benefited consumers with
disabilities.
We are committed to working on compromise legislative language that
would address the needs of the disability community, while not
unreasonably impacting manufacturers and harming the overall economy.
conclusion
Sony, and indeed CE manufacturers generally, support bringing true
competition to the market for video services as soon as possible. We
particularly support the efforts of new facilities-based entrants like
the ILECs. Marketplace competition for video services will bring
consumers lower prices and allow manufacturers to develop new and
innovative products for consumers to access these services.
Again, thank you for the opportunity to address the Committee on
these important matters. We look forward to continued cooperation with
the Committee and other interested parties.
Mr. Upton. Thank you very much. Mr. Wilson?
STATEMENT OF DELBERT WILSON
Mr. Wilson. Good afternoon, and thank you for inviting me
to testify before you today. I am the general manager of
Industry Telephone Company, which is headquartered in Industry,
Texas. Our service area encompasses 226 square miles. We have
three telephone exchanges providing service to approximately
2,352 access lines. That is a density of only 10.3 subscribers
per square mile. In addition to local service, Industry
Telephone Company also provides Internet and inter-exchange
services. Through its extensive infrastructure investment,
Industry Telephone Company is a key driver to the local economy
and rural development throughout its service area.
Americans today uniformly rely on communications
infrastructure and services to satisfy their commerce, security
and entertainment. Moving forward, these needs will be met via
a combination of two-way voice, video and data options.
Consequently, deploying advanced infrastructure that is fully
capable of offering such services should become the hallmark of
our national communications policy. Unfortunately, as currently
crafted, we are not convinced the draft legislation that is the
subject of today's hearing would effectively establish such a
foundation. Rather than setting a stage that would yield a
ubiquitous broadband capable network the President and so many
others of us seek, we fear the structural approach to this
draft emphasizes regulatory silos that are not fully in sync
with the convergence taking place in the industry. But more
importantly, we particularly fear the approach could ultimately
undermine the Nation's long-standing commitment to universal
service. Without a strong commitment to this policy and the
mechanisms necessary to carry it out, it is possible the
dramatic vision this draft hopes to evoke may never
materialize.
A recent example of the importance of maintaining a strong
universal service policy is demonstrated by the recent
experience of ATCA member Cameron Communications in Sulphur,
Louisiana. All 11 of Cameron's exchanges were devastated by
Hurricane Rita. In the aftermath of that disaster, Cameron's
challenges are significant, yet thanks to the Universal Service
support, they are not insurmountable. While Universal Service
support helped to build a pre-hurricane Cameron system, it has
taken on an even more important role in the post-devastation
period. With nearly all of its business and residential revenue
base temporarily walked-out, the Universal Service support it
receives is sustaining the system during this time of extreme
need. By the way, Cameron is home to the Nation's Strategic
Petroleum Reserve, which is of grave importance to all
Americans.
We are particularly concerned that the draft unnecessarily
ignores that the communications industry is converging into an
industry where carriers will be offering bundled voice, video
and data services. What is needed is a broad definition of
communications services that is not technology specific. A
regulatory regime is necessary that regulates like services in
a like manner regardless of the technology used. This regime
must account for the high-cost networks and protect the
integrity of the infrastructure that all of these providers
equally rely upon to offer their services. This is the only way
to preclude the sort of arbitrage that has already been allowed
to occur under today's regulatory classification scheme, and
that would surely continue on the approach envisioned by this
draft.
We are also concerned with the draft's interconnection
provisions. While some of the earlier draft's more troubling
aspects in this regard have been eliminated, we continue to
believe more clarity is called for. The rural industry has
always been in a difficult position when it comes to
negotiating such matters, because, frankly, there is little
incentive for others to come to the bargaining table with a
small rural carrier.
In addition, if the regulatory silo approach of the draft
is preserved, we believe the interconnection and the reciprocal
compensation arrangements discussed above should be clarified
to apply to all titles of the Act. If regulatory equity among
industry segments is truly the committee's objective, then this
is a must.
The draft in question today is complex and requires careful
review. We intend to continue our scrutiny of its details, and
we will certainly be happy to provide the committee with
additional viewpoints as they emerge. In the meantime, it is
important that the committee is fully aware of the rural
sector's thoughts regarding any rewrite of our communications
statutes. These details are outlined in my written statement.
In terms of a broader rewrite of the Communications Act, we
would implore the committee to remain cognizant of these
specific areas that are so critical to rural carriers and the
consumers they serve. If you are able to do that, you will have
successfully ensured the creation of an environment that will
sustain the Nation's commitment to ensuring all Americans with
access to comparable, affordable communications services now
and in the future. Thank you, Mr. Chairman.
[The prepared statement of Delbert Wilson follows:]
Prepared Statement of Delbert Wilson, General Manager, Industry
Telephone Company on behalf of Industry Telephone Company and National
Telecommunications Cooperative Association
Good morning! ITC is a company headquartered in industry, texas.
Our service area encompasses 226 square miles. ITC has 3 telephone
exchanges providing service to approximately 2,352 access lines. That
is a density of only 10.3 subscribers per square mile. In addition to
local service itc also provides internet and interexchange services.
Through its extensive infrastructure investments, itc is a key driver
of the local economy and rural development throughout its service area.
ITC is representative of the nation's rural incumbent local
exchange carriers. The good things we stand for and do make rural
communities a better place in which to live and work. And make no
mistake about it, our efforts contribuite directly to making the nation
as a whole stronger and more secure. That is why I am honored to be
appearing today on behalf of the hundreds of similarly situated rural
carriers represented by the national telecommunications cooperative
association--and more importantly, on behalf of their several thousand
employees and several million subscribers.
Throughout the debate surrounding the communications act rewrite,
the initiative's most ardent advocates have repeatedly cited
deregulation and competition as the keys to maintaining america's
communications preeminence. Their theme revolves around the ideas that:
``absolute competition and deregulation are always in the public
interest; the communications era can only evolve to the next level with
a hands-off policymaking aprroach; and the universal service oriented
foundations of our past must be abandoned in favor of preferential
treatment for specific emerging technologies and concepts.''
The nation's rural carriers do not agree with this premise. The
flaw with all these theories is that neither alone nor in tandem will
any of them produce the results their advocates so desperately seek. In
fact they will not even be capable of maintaining the status quo. And
in the aftermath of recent natural disasters as well as the subversive
threats our nation faces today, these communications can mean the
difference between life and death.
How many of you are aware of the critical role rural communications
systems play in the aftermath of these types of events? As we speak,
one such NTCA member continues its scramble to rebuild its system in
the aftermath of huricanes Katrina and Rita that hit the Louisianna and
Texas coasts. Cameron communnications in Sulpher, Louisianna,
represents a critical economic and security link in Sulphur, in Cameron
Parish, in Louisanna, and yes even in the United States.
Cameron's service territory covers the states largest parish from a
geographic perspective but perhaps it's smallest from a demographic
perspective. Thankfully for all Americans, Cameron, like all NTCA
members, views their mission as one based in the moral obligation of
placing service ahead of profits. This is a particularly critical point
considering the challenges Cameron faces today. This small rural system
has been tasked with bringing communications service to the nation's
strategic petroleum reserve which is located within its territory. In
addition, there are major liquified natural gas facilities and a host
of other petroleum related businesses in Cameron's territory that are
relying on them to provide crucial services. If that were not enough,
Cameron is also responsible for providing services to the National
Guard, the Federal Emergency Management Agency, the Red Cross and other
releif organizations currently operating in the area.
Cameron's challenges are significant. Yet thanks to universal
service support, they are not insurmountable. While universal service
support helped to build the pre-hurricane cameron system, it has taken
on an even more important role in the post-devestation period. With
nearly all its business and residential revenue base temporarily wiped
out, the universal service support it receives is sustaining this
system during this time of extreme need.
But that is just one example of rural carriers being prepared, as
well as responding to natonal needs in the aftermath of significant
events. How many of you are aware that it was a small rural system in
the central plains that the Federal Government turned to for help in
the immediate aftermath of the events of September 11, 2001. As efforts
were launched to position the Vice President in a secure location, NTCA
member venture communications, based in Highmore South Dakota was
called to help with the effort. Again, because they were prepared, they
were able to quickly establish secure communications in a remote
location that the security intersts of that time mandated. And again,
they were largely able to do this due to our national commitment to
universal service.
My point is there are more critical policy footings than
compettition and deregulation that must remain in place to ensure the
existence of a robust nationwide ubiquitous communications network--a
network capable of supporting advanced services and responding to our
nation's economic and security needs. Full cost recovery, fair access
and interconnection are critical to a strong and useful communications
foundation. Without them, there will be no network, be it wireline,
wireless, or some other medium, to provide consumers with access to IP-
enabled or broadband oriented services.
With regard to cost recovery, there are primarily two issues to
keep in mind--universal service, and intercarrier compensation. These
are not industry regulations as so many would like us to believe. They
are industry responsibilities. In general, the industry as a whole
believes that the way in which funds are collected and distributed for
universal service and intercarrier compensation must be changed to
ensure our network continues to thrive. The solutions for both are
fairly simple ones.
For universal service, we must refrain from ever linking its
support mechanisms to general revenues, as its current industry funded
approach is well proven. In additon, the base of contributors should be
expanded and its distribution should be cost based to ensure
accountability and credibility. This is contrary to the current rules
where competitive providers receive suport based on the incumbents
costs, regardless of their true cost of service.
With regard to intercarrier compensation if any service provider
uses another provider's network that service provider must compensate
the other provider for the use of their facilities--at an appropriate
rate. This notion is not complex; it is simply ensuring that all
players stand up to their responsibilities of having the opportunity to
partake in our capitalistic marketplace.
Many call intercarrier compensation or access charges an implicit
subsidy. I call it a legitimate operating cost for a telecommunications
provider. We have invested tens of millions of dollars to serve rural
communities. If a carrier would rather come and build their own network
instead of using ours for a nominal fee, they are welcome to do so. As
an internet provider myself, I compensate the owner of the Internet
backbone that I must utilize to offer internet services to my
customers. I view this as a legitimate cost for providing internet
services to our customers. I recognize and accept that without use of
their network I could not provide these services for my customers. I am
therefore fortunate that the network resources are available to help me
in providing my customers with the full array of advanced services that
are available today.
Tell me, why should a new service provider be able to access this
network for free? Much of this debate seems to be focused on whether
new IP-enabled service providers should pay access charges. To those of
us that toiled to finance the deployment of infrastructure the question
is: why should they not? I understand that we don't want to bog down
new entrants with unnecessary regulations, but allowing them to skirt
industry responsibilities is simply wrong. If a new provider's business
plan can't accommodate playing by the rules and upholding industry
responsibilities, then they probably shouldn't be playing. After the
1996 Telecom Act, we saw a large influx of new telecom entrants.
Unfortunately, many did not have sound business plans and were soon out
of business or in bankruptcy thus, hampering investment in the
telecommunications industry as a whole. We don't want to recreate the
boom/bust scenario of that period by artificially incentivizing unsound
businesses that cannot operate without benefitting from regulatory
arbitrage.
Americans today uniformly rely on communications infrastructure and
services to satisfy their commerce, safety, security, entertainment,
and leisure needs. Moving forward, these needs will be met via a
combination of 2-way voice, video, and data options. Consequently,
deploying advanced infrastructure that is fully capable of offering
such services should become the hallmark of our national communications
policy.
Unfortunatley, as currently crafted, we are not convinced the draft
legislation that is the subject of today's hearing would effectively
establish such a foundation. Rather than setting a stage that would
yield the ubiquitous broadband capable network the president and so
many others of us seek, we fear the structural approach of this draft
emphasizes regulatory silos that are not fully in sync with the
convergence taking place in the industry. But more importantly, we
particularly fear this structural approach, whether by design or
accident, could ultimately undermine the nation's long-standing
commitment to universal service. Without a strong commitment to this
policy, and the mechanisms necessary to carry it out, it is possible
the dramatic vision this draft hopes to evoke, may never materialize.
We are particularly concerned that the creation of three new
regulatory classifications for communications infrastructure as
suggested in this draft unnecessarily ignores that the communications
industry is converging into an industry where carriers will offer
voice, video and data. What is important is the one pipe that carriers
will offer their services over, not what technology is utilized. What
is needed is a broad definition of communications services that
includes all services, regardless of the technology used to deliver the
service or the regulatory classification of the service that are
capable of supporting 2-way voice communications, data, video and any
new advanced services used to communicate. A regulatory regime is
necessary that regulates like services in a like manner regardless of
technology used. This regime must account for high cost networks and
protect the integrity of the infrastructure that all of these providers
equally rely upon to offer their services. This is the only way to
preclude the sort of arbitrage that has already been allowed to occur
under today's regulatory classification scheme and that would surely
continue under the approach envisioned by this draft.
Our overriding concern with the structural approach of the bill
notwithstanding, the drafters have identified and attempted to address
several areas that are of specific concern to the rural sector of the
industry. Yet we fear many of these may require additional
clarification as well. For example, while its reference to
interconnection duties in sections 103 and 203 are appropriate, and the
drafters have deleted some of the troubling provisions from the earlier
draft, we continue to believe more clarity is called for to ensure they
truly accomplish what is necessary from a rural provider perspective.
The rural industry has always been in a difficult position when it
comes to negotiating such matters because frankly there is little
incentive for others to come to the bargaining table with a small rural
carrier. The degree to which matters such as this can be given more
clarity will benefit all rural americans.
In addition, if the regulatory silo approach of the draft is
preserved we believe the interconnection, and reciprocal compensation
arrangements discussed above should be clarified to apply to all titles
of the act. If regulatory equity among industry segments is truly the
committee's objective then this is a must. The draft in question today
is complex and requires careful review. We intend to continue our
scrutiny of its details and will certainly be happy to provide the
committee with additional viewpoints as they emerge. In the meantime,
it is important that the committee is fully aware of the rural sector's
thoughts regarding any rewrite of our communications statutes.
Earlier I had alluded to the fact that in our mind any rewrite
initiative must ensure the ability of carriers to fully recover costs
and to have fair access and interconnection capabilities. Indeed,
moving into this debate we put forth the following specific concepts
that we believe must govern the construction of communications policy
for the future which is based on the following general principles:
Regulatory approach--
Must be approached from a flexible perspective. Placing all carriers
on an equal regulatory footing is an admirable goal yet one
that does not equate total deregulation.
The rural sector has, and will, necessarily continue to rely upon the
preservation of a certain level of regulation that is inclusive
of industry responsibilities that all must live up to.
Typically, a federal/state partnership works best to meet the needs
of rural consumers.
Universal service--
General issues:
The universal service fund must continue to be an industry funded
mechanism, and neither supported through general tax revenues
nor subjected to the federal anti-deficiency act.
Contribution issues:
The base of contributors must be expanded to include all providers
utilizing the underlying infrastructure, including but not
limited to all providers of 2-way communications regardless of
technology used.
Support shall be made available for the cost recovery needs of
carriers deploying broadband capable infrastructure.
The contribution methodology must be assessed on all revenues or a
revenues hybrid that ensures equitable and nondiscriminatory
participation.
The regulatory authority to modify the scope of contribution
obligations as technology evolves must be clarified and
strengthened.
Distribution issues:
Support must be used to construct, support, and maintain networks to
benefit all consumers and must not be voucher, auction, or
block grant based.
Support must be based upon a provider's actual cost of service.
Support must not be used to artificially incite competition.
The rural and non-rural fund distinctions must be maintained.
Rules must be streamlined to encourage acquisitions of adjacent
underserved exchanges.
Intercarrier compensation--
Carriers must be compensated for all traffic utilizing their
networks.
Carriers must identify their traffic to discourage arbitrage and
phantom traffic. Identifying information must be passed along
by all intermediate carriers.
Appropriate transitional time frames are necessary to ensure
continued access to quality/affordable communication services
in rural areas.
Network access/interconnection--
All providers must continue to have the obligation to allow other
providers to interconnect with their networks.
Default rates, terms, and conditions for access to and use of network
facilities must be maintained as technology evolves.
Rural providers must have realistic access to spectrum.
Video content--
Providers must have non-discriminatory access to video content at
reasonable and non-discriminatory rates, terms, and conditions
regardless of distribution technology used.
Non-disclosure, tying, and exclusive programming agreements regarding
rates must be prohibited.
Predatory pricing by large incumbent cable operators must be
prohibited.
In terms of a broader rewrite of the communications act, we would
implore the committee to remain cognizant of these specific areas that
are so critical to rural carriers and the consumers they serve. If you
are able to do that you will have successfully ensured the creation of
an environment that will sustain the nation's commitment to ensuring
all Americans with access to comparable affordable communications
services now and in the future. Thank you.
Mr. Upton. Well, I want to thank all of you for staying this long.
I hope you didn't line have sitters this morning. I saw some early this
morning when I came in at 7. And I do want to just note for the record
that--and in spite of not having a lot of members now--remember we
started very early this morning--we have had 28 members on both sides
of the aisle participate, which is not quite a record, but it shows the
interest, obviously, of this legislation, and I don't think anyone
quite figured that it would last this long with the number of votes
that we had today. And I would just make a motion that all members of
the subcommittee have a couple days to submit questions in writing that
you might be able to respond. We will keep the record open to include
that, if it happens.
I have a couple of questions before I yield to either one of my
Democratic colleagues or the Vice Chairman of the subcommittee Mr.
Bass. I want to start, I guess, first of all with Mr. Bowe. Again, we
appreciate your participation today. I have two questions. I will ask
them both and then let you respond. One, in your testimony, you state
that home access to the Internet has just passed 50 percent. How many
people with disabilities would you estimate that are currently unable
to access and use the Internet today due to the accessibility issue?
That is No. 1. My second question is the bill--this draft would require
manufacturers and service providers to make broadband equipment and
services accessible to people with disabilities unless doing so would
cause an undue burden. In your opinion, how will the change from
today's readily achievable standard to the undue burden standard impact
the lives of people with disabilities?
Mr. Bowe. Thank you, Mr. Chairman. To take them in order, first,
the proportion of Americans with disabilities who are not able to
access the Internet because of accessibility issues specifically--we
don't have a particular number. I can give you some guesses, but----
Mr. Upton. Okay.
Mr. Bowe. [continuing] I can't give you a specific number. I would
guess something in the order of 20 to 30 percent, and the reason I say
that is that is a--issue specific to different--or different web sites.
Most web sites and most places that you go to on the web are not
accessible for people with learning disabilities and people who are
blind. The vast majority do not comply with standards for
accessibility. That being so, your bill does not get into regulating
that, so I don't want to go too far with the 20-percent number. There
are others who is having to do with affordability and having to do with
the availability of the basic equipment. Those issues are beyond the
question that you asked me. But if you ask about public school children
with disabilities, those nearly 100 percent of them gain access every
school day because they do it from school. Once you help people leaving
in school and living in adulthood, give affordability so that would
reduce your number. Okay.
And your other question on me, undue hardship defense of
manufacturers. First of all, the 1996 Act, as you well know, required
that excessive parody--was readily achievable, but we are now in--of
any effort with the manufacturers of hardware and software and the
providers have services have been asked to make access accessible if
they can do it, and if they can't, to please explain why they can't. I
think by now they certainly have experience--9 years of experience with
us. Now, but I also want to make the point that today's technologies,
from the cell phones that we use, to PDAs, even to desktops, we are not
talking about machines that have a shelf-life in months, maybe up to a
year. And also we have things that are very, very heavy in software
that if I want to put a new version of a cell phone or a new version of
a PDA, what I do is just plug in some new card. Now with all of these
cases, you can make something accessible, much easier, much faster and
much cheaper than you could in 1995 and 1996. For all--undue burden
standard is not a--difficult standard for them to meet. I don't think
it would have any reasonable impact on them at all.
Mr. Upton. Okay. Thank you. I know my time is expired. Mr. Bass has
waited. I have some other questions, but I will yield to Mr. Bass for 5
minutes.
Mr. Bass. Thank you. I thank the Chairman, and I think I am only
going to ask one question, a general question, so you can continue. Mr.
Wilson, you dealt more than--I don't have a specific question for you.
You dealt more than anybody else, I believe, in the issue of rural
services and how this bill would affect that, and I am reviewing your
testimony now. I am wondering whether there are any aspects of this
staff draft, any additions that we might be able to make, any leverage
points, or incentives, or thoughts or anything that we might employ
that would maximize the deployment of advanced services to rural
communities like the 179 or 180 or so that I represent in New
Hampshire?
Mr. Wilson. Well, sir, I think--speaking on behalf of rural
companies--I think, you know, we are very interested in going forward
with advanced networks to offer all these new services to our
customers. I think the main thing we need going forward is a stable
environment of--you know, things are still uncertain and it is very
difficult to make investments because we don't know what is going to
happen. Everything is just a flux these days. We need--stability and a
strong Universal Service policy, something we can count on before--and
where we can make investments and recover those costs, we as rural
carriers will build those networks to deliver those advanced services
to the rural consumers across this country. In many cases, we are
already well under way doing that.
Mr. Bass. Does anybody else have any comments on it or not? Then,
finally, Mr. Wilson, the--I am reading your summary. The provision
allowing for new government networks to compete with existing carriers
has always been a concern to the rural industry and is inconsistent
with their position in that regard. You are not referring to Section
409 the government authority to provide services, is that what you are
referring to, or something else?
Mr. Wilson. I am totally not sure of exactly what Section.
Mr. Bass. Okay.
Mr. Wilson. But, no, sir, we do not agree with government competing
with us in networks. I just don't believe our tax dollars be used
against us that way than providing dollars----
Mr. Bass. If we weren't involved, would you have a problem with it?
Mr. Wilson. Well----
Mr. Bass. If the municipalities had--if there was no provision--if
a small community, for one reason or another, they couldn't get the
kind of services that larger communities could get and the community
itself decided to undertake the challenge of providing broadband high-
speed services itself, and they charged their customers for that. It
wasn't--they didn't use money that they were collecting for the
recycling center or for plowing roads and so forth, would there be a
problem with that?
Mr. Wilson. In most cases that I am aware of in rural communities,
our rural carriers are very attentive to their customer base and
delivering services such as you are talking about here. I just think
that we should always be careful in opening the door to allow
government municipalities, or state, or whatever, to be in competition
with us, you know. After----
Mr. Bass. Do you think a rural community that is advised by
whatever providers that exist that they just don't want to do it
because it's not cost effective, that those citizens should be denied
the ability to look for alternatives that might include a municipal
plan?
Mr. Wilson. I couldn't--I would have to agree with you there, that
just because they are rural citizens, they should not be denied the
access to such things if the provider fails to provide that service. I
think you would have to be very specific in the case where the carrier
of the--the local exchange carrier has failed to do so or refuses to do
so, but I think in--again, in the cases I know of in the rural areas, I
don't know of a case where a municipality already served by a rural
company that the rural companies have not been attaining to meet their
customers' needs, because we are very--you know, they are our
neighbors, our friends, we live with them, and we hear from them
regularly and we try to do our best to serve them. That is what we are
all about is service to our customers.
Mr. Bass. Any other comments?
Mr. Kimmelman. Mr. Bass, I think that what we are finding is there
are a lot of communities in which people do not have access to adequate
broadband service, prices are high, or in some cases services isn't
even available. One of the most admirable portions of this bill, I
believe, is allowing communities to step in. And, as you heard this
morning from EarthLink, they are paying for building a network in
Philadelphia. They are building out--it is on their own nickel, and
they are offering services as low as $10 a month for broadband access--
wireless access. I would love to see private enterprise do that, but
where they won't, it certainly is enormously helpful to have the
community band together and do it itself.
Mr. Bass. Thank you, Mr. Kimmelman. I yield back.
Mr. Upton. Mr. Markey?
Mr. Markey. Thank you, sir. Thank you, Mr. Chairman. I apologize.
Mr. Kimmelman, is there a concern from a consumers standpoint that the
net neutrality right, the freedom to access all Internet content, or
the ability to get higher bandwidth may still be available but simply
for an extra fee or a higher price, how do you suggest that we address
that very real consumer concern?
Mr. Kimmelman. Well, first off, Mr. Markey, I think it is very
important that if you look at the structure of the staff draft, that a
lot of traditional terms of communications policy from Title I and
Title II may no longer exist on the way it is written. We don't know
what reasonable and unreasonable is under this draft. By the way,
certain parts of the Communications Act appear to have been wiped out.
But even if they are what they traditionally have been, it is left to
private negotiations to work this our. And one major concern we have is
that broadband providers start doing what cable companies have
traditionally done, which is to say that you can have certain channels,
but you have to buy these other channels to get it. You can have
Internet access, but you have to buy our Internet access before you can
buy something else. Pay me once, pay me twice, pay me three times. Now
that may not be absolute blocking of applications and services, but it
certainly is unfair and inflating prices for consumers.
Mr. Markey. In the previous draft, we had a provision which
prohibited a broadband video service provider from requiring a
financial interest in a program service as a condition for carriage.
The new draft deletes the prohibition. Do you think that that is a good
policy decision?
Mr. Kimmelman. I think it is quite dangerous, Mr. Markey. You will
recall in the 1992 Cable Act, Congress put in such a provision related
to cable because of previous abuses in the cable industry where
channels could not be carried, they would not be carried, by the
dominant cable companies unless the dominant company was allowed to own
an equity stake in it. I think it was a wise choice to do then with
cable, and it would be wise to do with any broadband provider that has
a dominance over its platform.
Mr. Markey. Mr. Barton asked the first panel if they preferred the
first draft--bipartisan draft or the second draft--the one that we are
talking about right now. Which of the two drafts did each of you
prefer? Let us go down the list, the first draft or the second draft,
if you had to pick one of the two?
Mr. Bowe. I will pick option number 3.
Mr. Markey. No, no, no. No, I know.
Mr. Bowe. Because----
Mr. Markey. I understand.
Mr. Bowe. [continuing] with respect are identical----
Mr. Markey. I understand what you are saying. I know where you are
going. Mr. Clark, first draft or second draft?
Mr. Clark. Oh, gosh. I mean, neither one meets the standards of----
Mr. Markey. I understand that.
Mr. Clark. [continuing] the framework----
Mr. Markey. Which one heads further in the right direction?
Mr. Clark. I will go with two.
Mr. Markey. No. 1, Mr. Haasch?
Mr. Haasch. No. 1.
Mr. Markey. Mr. Kimmelman?
Mr. Kimmelman. No. 1.
Mr. Markey. No. 1.
Mr. Wiginton. No. 1.
Mr. Markey. No. 1.
Mr. Wilson. I would have to abstain because we don't like neither
of them.
Mr. Markey. Well, but you know what, my mother once said to me,
Eddie, people aren't going to compare you to the Almighty, only to the
alternative. Okay. And that is how life is going to be. Okay? And that
is how it is for you, Mr. Wilson, right now. No. 1 or No. 2?
Mr. Wilson. If we are able to have more input in the process----
Mr. Markey. Yes.
Mr. Wilson. [continuing] and get some of the concerns that we have
addressed?
Mr. Markey. Yes.
Mr. Wilson. Probably No. 2----
Mr. Markey. Okay.
Mr. Wilson. [continuing] if we are going to work with you.
Mr. Markey. Okay. Thank you. That is very helpful to me. So the
issues here now that I would like to move on to are the PEG access
issues. The corporations rely on fees from franchise fees to fund
operations over the length of the agreement. What concerns do you have,
Mr. Haasch, if a franchisee qualifies for a national franchise prior to
the expiration of a franchise agreement? What effect on your--will this
have on your revenue expectations?
Mr. Haasch. Well, clearly, that is if the bill goes forward with
the modified gross revenue definition for a new entrant in the market.
If the incumbent transitions to that new model, they also would be
subject to the revised gross revenue definition, and therefore in
essence reducing the compensation amount coming to the local
government. That is the primary concern. I need to step back and also
point out that under existing law, there is compensation from a cable
operator that funds a PEG access operation above and beyond franchise
fees. To us, to the Alliance, that is one of the glaring financial
considerations in this bill.
Mr. Markey. Okay. Mr. Clark, I just want to do a quick
recapitulation of the vote. Did you really intend on voting for the No.
2 and not the No. 1?
Mr. Clark. Let me explain that. The--Congressman Markey, our
Association--from an Association standpoint, the one thing that
probably is preferable in one to two is that there are some more
interstate interconnection nexus at that point and the State
Commissions have more interconnection rights under the first one. From
a personal standpoint, the reason that I picked two is because I think
two does--and, again, this is not an Association view, but if I had to
pick one or the other, I think two does a little bit more, perhaps, to
allow for the tearing down of barriers to entry on the video side, and
from a personal standpoint, the reason that I place a high value on
that is I really believe that in the future Telecom market, video is
going to drive a tremendous----
Mr. Markey. And I appreciate----
Mr. Clark. [continuing] amount of--so that is the reason for that.
Mr. Markey. And you think that would be the--are you a Democrat or
a Republican, by the way?
Mr. Clark. I am a Republican.
Mr. Markey. A Republican? Okay. That is helpful also to know. And
you might be moving up, because I don't think you really do represent
all of NARUC, Mr. Clark----
Mr. Clark. Yes.
Mr. Markey. [continuing] although I appreciate the fact that you
are expressing your personal view here, I sincerely doubt that that is
NARUC's position. So my view here--Mr. Bowe, you want to stick with
number 3?
Mr. Bowe. I would just like to add, from the disability point of
view, we are in legal limbo. We are in a world of technology with no
accessibility protection whatsoever. What we need, we need legislation.
We need bipartisan cooperation.
Mr. Markey. I am with you.
Mr. Bowe. We need you to write a law and send it to the President.
That is what we need.
Mr. Markey. I wrote the close captioning language in the 1990, you
know, bill dealing with new televisions. I wrote the language in----
Mr. Bowe. I saw you make that first step there.
Mr. Markey. [continuing] the Telecommunications Act. You know I
agree with you and----
Mr. Bowe. Absolutely.
Mr. Markey. Okay. Thank you. Well, anyway, right now it is 6-4 in
favor of the first draft over the first two panels, which is a good
sign. And, Mr. Clark has a personal preference. I am not sure that
NARUC is thrilled across the country with that position, but,
nevertheless, we will--all right, we will let that sit. So, you know,
here is what we have--and I appreciate, Mr. Chairman, that we are
still--we are sitting here now pretty much alone, but I don't know--
have you already asked your questions? I don't know----
Mr. Upton. Mr. Bass is going to get one more question.
Mr. Markey. Okay. Great. Thank you. The one thing, just so I can,
you know, lay this out--the one thing that I am most interested in is
ensuring that we don't have a repetition of what happened back in 1996.
Mr. Ellis, on the first panel, began by criticizing the regulations
that were put on the books pursuant to the 1996 Act. Now, the Chief
Counsel of SBC at the time, and all of regional companies, came into my
office, and they begged us to pass the 1996 Act. And there was a good
reason why, because they were tired of Judge Green's regulations, which
were many more than 700 pages long over the preceding 15 years, and
begged us to pass it.
Now, Mr. Ellis seems to be upset that there was a 14 point
checklist in the bill that they endorsed, and that there were
rulemakings for all 14 points that were mandated in the bill. And so
what was disturbing to me, to be honest with you, was that after the
bill passed, SBC then brought a law case calling the legislation a bill
of attainder, trying to strike down the entire bill so that they would
be free from the judicial constraints of Judge Green and then free from
the restraints in Congress. Now, you can imagine how upset people who
had spent the preceding 6 years of their lives negotiating with SBC,
and negotiating with the other Bells, became. And so there has to be,
as we are going forward, no terminal logical inexactitude in what it
is, that the users and consumers of all these new services are entitled
to by law. It cannot be left to vague language subject to subsequent
interpretation that could delay indefinitely the actual benefits
flowing to consumers.
But everyone should know this, that the 1996 Act was a complete
success. 80 percent of all Americans now have broadband going past
their front door. On the day that the bill passed, no homes in America
had broadband. And this despite the fact that the Bells fought for the
first 3 or 4 years any real progress on their front, but because it was
happening from the CLECs and the cable companies and others, they had
to join in. So now our chore is to make sure that the consumers derive
the benefits from this interest which the cable--which the telephone
companies now have, which I think is great. It doesn't help me when the
Bells say that it will take them 40 years to deploy this service. From
the moment in 1978 in this committee when we repealed the ban which the
telephone companies had on the cable companies using their telephone
poles, and we mandated that the telephone companies had to let the
telephone companies had to let the cable companies use their telephone
poles, it only took 10 years for the cable industry to wire 80 percent
of America. The Bells sit here telling us it will take them 40 years
for them to do that, 30 years later. Which, again, leaves observers
wondering whether or not they--whether and how high their sincerity
coefficient is.
And, by the way, the cable companies served every single customer
in America, which the Bells say they can't do. They need 40 years to do
something without promising that they are going to serve every
consumer. So if we can get a definition, if we can get some guarantees
with regard to what it is exactly that consumers are going to get, what
protections competitors are going to get, then I think we all are
willing to be open-minded as we were in that first staff draft. But it
cannot be a world in which ambiguity, obfuscation, lack of definition,
characterizes what it is that is the final product.
And so I thank you, Mr. Chairman, for this hearing. I think it has
provided an enormous public service. Your witnesses were great and I
hope that it is not our last hearing. I thank you, Mr. Chairman, very
much.
Mr. Upton. Thank you, Mr. Markey. I have one more question that I
want to ask Mr. Haasch, and that is I want to get a better
understanding of the 5-percent franchise fee as it relates to the PEG
programming. From your experience from your testimony, you indicated
that 40 percent of the contribution of the franchise fees for PEG in
Kalamazoo--or comes to the facility in Kalamazoo, is that on the higher
end, on average, or the lower end for a lot of communities?
Mr. Haasch. It is tough to say. The community I came from, Ann
Arbor, Michigan, over here----
Mr. Upton. You can go like this. This is called the Big House.
Mr. Haasch. The Big House?
Mr. Upton. Yes.
Mr. Haasch. 100 percent were dedicated to cable-related but----
Mr. Upton. That is the question I wanted to come back to. How many
communities actually contribute maybe 100 percent of that fee? Is that
a majority? Is it 75 percent?
Mr. Haasch. It certainly is not a majority, certainly not. I
believe the Kalamazoo model, where a percentage anywhere in the 40- to
60-percent range that goes to the access, and the balance goes to the
community's general fund. I believe that is the prevailing structure.
Ann Arbor and the few other communities that I know of where 100
percent is dedicated to the cable programming, I believe they are the
minority, although I do know that in talking with Ms. Praisner this
afternoon, that community also dedicates 100 percent----
Mr. Upton. Really?
Mr. Haasch. [continuing] for their--yes.
Mr. Upton. Well, would you say that you would prefer--do you think
there would be general support that all of the monies of--that
municipalities receive are dedicated to the PEG channels? Is that a
good thing or a bad thing----
Mr. Haasch. I know----
Mr. Upton. [continuing] or percentage-wise, or where do you think
it ought to be?
Mr. Haasch. From the PEG community, certainly, although I had this
conversation----
Mr. Upton. What do you think is a reasonable request?
Mr. Haasch. The concern is dictating to local government how they
use that revenue. Revenue, although philosophically and conceptionally,
I think a strong argument can be made that you are reinvesting in the
system because you are creating local content, and I believe that is
the hook of any discussion on that train.
Mr. Upton. And I know that she is gone, but what do you think the
cities would say, what level might they be able to support, would you
guess, since you talked a little bit about her?
Mr. Haasch. I hesitate to speculate, but in the even splits. If you
are going to----
Mr. Upton. 50? So you would say that 2.5 percent----
Mr. Haasch. If you are going----
Mr. Upton. [continuing] at least as a minimum----
Mr. Haasch. [continuing] if you are going to----
Mr. Upton. [continuing] to have to go to the PEG channels.
Mr. Haasch. If you want to pursue that discussion with local
government, I would suggest starting in that area. I--there would be a
mixed bag of support.
Mr. Upton. Okay. Well, it is 4:20. Mr. Clark and I are late for our
4:10 plane, so we will how he does. It might not be a lot of people
flying to North Dakota today. I am not sure. But I want to--we
appreciate all your testimony.
Mr. Bass. Can I ask one more question, Mr. Chairman?
Mr. Upton. Yes. Mr. Bass.
Mr. Bass. And if it is not relevant to this panel, just don't
answer it, but I am curious to know if anybody has any perspective on
the one--for video, on the one--on the Federal franchise versus 50
franchises or State-wide franchise issues. Does anybody--the bill has a
single franchise provision for video. Is there concern about that or
are there alternatives? If nobody wants to respond to it, you can
leave.
Mr. Wilson. From the rural companies point of view, that is a real
issue for us.
Mr. Bass. Okay.
Mr. Kimmelman. I would just say, Mr. Bass, that we are agnostic.
The communities, we think, have done a good job in a number of areas,
but we also see there is not enough competition for video. We need to
speed something up. So whether you create a scheme whereby it would be
up to the States or you do it federally, what is important to us is
there needs to be substantial local input in meeting community needs,
whether it is Federalized or whether you delegate it back. But, we do
believe it is critical that you look to speeding up competition for
video.
Mr. Haasch. I would reiterate Mr. Kimmelman's point about community
needs, and from the Alliance's viewpoint, as long as PEG access and the
development and funding and support for local content, Federal versus
State model, from the Alliance's standpoint, is neutral.
Mr. Bass. Thank you, Mr. Chairman.
Mr. Upton. Thank you all for being here. Hearing is adjourned.
[Whereupon, at 4:22 p.m., the subcommittee was adjourned.]
[Additional material submitted for the record follows:]
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