[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]


 
    HOW INTERNET PROTOCOL-ENABLED SERVICES ARE CHANGING THE FACE OF 
            COMMUNICATIONS: A LOOK AT THE VOICE MARKETPLACE

=======================================================================

                                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

                               __________

                             MARCH 16, 2005

                               __________

                           Serial No. 109-44

                               __________

       Printed for the use of the Committee on Energy and Commerce


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house


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                    ------------------------------  
                    COMMITTEE ON ENERGY AND COMMERCE

                      JOE BARTON, Texas, Chairman

RALPH M. HALL, Texas                 JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida             Ranking Member
  Vice Chairman                      HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio                EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 FRANK PALLONE, Jr., New Jersey
ED WHITFIELD, Kentucky               SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia             BART GORDON, Tennessee
BARBARA CUBIN, Wyoming               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
HEATHER WILSON, New Mexico           BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona             ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING,       ALBERT R. WYNN, Maryland
Mississippi, Vice Chairman           GENE GREEN, Texas
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania        JIM DAVIS, Florida
MARY BONO, California                JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon                  HILDA L. SOLIS, California
LEE TERRY, Nebraska                  CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey            JAY INSLEE, Washington
MIKE ROGERS, Michigan                TAMMY BALDWIN, Wisconsin
C.L. ``BUTCH'' OTTER, Idaho          MIKE ROSS, Arkansas
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee

                      Bud Albright, Staff Director

      James D. Barnette, 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:
    Erickson, Paul, Chairman, Sunrocket..........................    16
    Grivner, Carl J., Chief Executive Officer, XO Communications.    21
    Melcher, John, Executive Director, Greater Harris County 911 
      Emergency Network..........................................    27
    Puckett, Karen, President, Chief Operating Officer, 
      Centurytel, Inc............................................    35
    Rutledge, Thomas M., Chief Operating Officer, Cablevision 
      Systems Corporation........................................    40
    Shlanta, Mark, Chief Executive Officer, South Dakota Network 
      Communications.............................................    43
Additional material submitted for the record:
    Rutledge, Thomas M., Chief Operating Officer, Cablevision 
      Systems Corporation, response for the record...............    74

                                 (iii)

  


    HOW INTERNET PROTOCOL-ENABLED SERVICES ARE CHANGING THE FACE OF 
            COMMUNICATIONS: A LOOK AT THE VOICE MARKETPLACE

                              ----------                              


                       WEDNESDAY, MARCH 16, 2005

                  House of Representatives,
                  Committee on Energy and Commerce,
                         Subcommittee on Telecommunications
                                          and the Internet,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:09 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Fred Upton 
(chairman) presiding.
    Members present: Representatives Upton, Bilirakis, Stearns, 
Gillmor, Whitfield, Shimkus, Wilson, Pickering, Fossella, 
Radanovich, Bass, Walden, Terry, Ferguson, Sullivan, Blackburn, 
Barton (ex officio), Markey, Wynn, Doyle, Gonzalez, Inslee, 
Boucher, Towns, Brown, Rush, Stupak, and Dingell (ex officio).
    Staff present: Howard Waltzman, chief counsel; Neil Fried, 
majority counsel; Will Nordwind, policy coordinator; Jaylyn 
Jensen, senior legislative analyst; Anh Nguyen, legislative 
clerk; Johanna Shelton, minority counsel; and Peter Filon, 
minority counsel.
    Mr. Upton. Good morning, everyone.
    Today's hearing is entitled ``How Internet Protocol-Enabled 
Services are Changing the Face of Communications: A View from 
the Voice Marketplace''.
    In 1876, Alexander Graham Bell uttered the words, ``Watson 
come here,'' into an experimental device, which came to be 
known, of course, as the telephone.
    The telephone dramatically changed the way that the world 
communicated. We have had the privilege of living through some 
similarly dramatic innovations in communications technologies, 
such as the Internet, cell phones. We are witnessing yet 
another dramatic innovation in the form of Voice-over Internet 
Protocol, or VoIP.
    Consumers are beginning to catch on. The number of VoIP 
subscribers is continuing to climb. There were more than a 
million VoIP subscribers at the end of 2004, 8 times as many as 
a year earlier, and there are likely to be 2.8 million VoIP 
subscribers by the end of 2005. Some, including myself, predict 
that that number will reach at least 16 million by the end of 
2008.
    Without a doubt, intermodal facilities-based competition 
has taken root with VoIP being delivered into homes and 
businesses over multiple technological platforms, as today's 
diverse witness panel will demonstrate. All of this robust 
competition is a byproduct of those free market forces that 
have been allowed to take root where government, by and large, 
has kept its hands off, so far.
    But VoIP is still in its infancy, and the regulatory ground 
upon which VoIP stands is not as firm as I think it needs to be 
in order to ensure that it reaches its projected potential. I 
would note that only 7 individuals, 5 FCC commissioners and 2 
Federal District Court judges, stood in the way of VoIP 
potentially being regulated by 51 State public utility 
commissions. And though I commend the FCC for rightly declaring 
VoIP's services to be interstate and subject to the FCC's 
exclusive jurisdiction. The FCC continues to grapple with a 
host of other important policy matters in its pending IP-
enabled services proceeding.
    I believe that Congress ultimately has the responsibility 
to definitely create the proper framework to ensure that this 
facilities-based competition in the VoIP marketplace is allowed 
to flourish, free from government management for the benefit of 
all consumers.
    And this is part of the mission that we hope to accomplish 
this year. On a bipartisan basis, as we seek to modernize our 
telecommunication laws, bringing them up to speed with today's 
as well as tomorrow's technology. That won't necessarily be an 
easy task, we know that, but we will have to grapple with a 
number of thorny issues, such as universal service, 
interconnection, intercarrier compensation, E-911, disabled 
access, just to name a few. To paraphrase President Kennedy, we 
will undertake this mission not because it is easy, but because 
it is hard.
    I want to thank all of our witnesses for their 
participation today and their efforts to inform our 
policymaking decisions as we move forward legislatively this 
year.
    [The prepared statement of Hon. Fred Upton follows:]

   Prepared Statement of Hon. Fred Upton, Chairman, Subcommittee on 
                  Telecommunications and the Internet

    Good morning. Today's hearing is entitled: How Internet Protocol 
Services are Changing the Face of Communications: A View from the Voice 
Marketplace.
    In 1876, Alexander Graham Bell uttered the words, ``Watson, come 
here'' into an experimental device which came to be known as the 
telephone. Of course the telephone dramatically changed the way the 
world communicated. We have had the privilege of living through some 
similarly dramatic innovations in communications technology, such as 
the Internet and cell phones, and we are witnessing yet another 
dramatic innovation in the form of Voice over Internet Protocol, or 
VoIP.
    And consumers are beginning to catch on. The number of VoIP 
subscribers is beginning to climb. There were more than 1 million VoIP 
subscribers at the end of 2004--eight times as many as a year earlier--
and there likely will be 2.8 million VoIP subscribers by the end of 
2005. Some predict the number to reach 16 million by the end of 2008.
    Without a doubt, inter-modal, facilities-based competition has 
taken root with VoIP being delivered into homes and businesses over 
multiple technological platforms, as today's diverse witness panel will 
demonstrate.
    All of this robust competition is a by-product of those free-market 
forces that have been allowed to take root where government, by and 
large, has kept its hands-off--so far.
    But VoIP is still in its infancy, and the regulatory ground upon 
which VoIP stands is not as firm as I think it needs to be in order to 
ensure that it reaches its projected potential. I would note that only 
seven individuals--5 FCC commissioners and 2 federal district court 
judges--stood in the way of VoIP potentially being regulated by 51 
state public utility commissions. And I commend the FCC for rightly 
declaring VoIP services to be interstate and subject to the FCC's 
exclusive jurisdiction. The FCC continues to grapple with a host of 
other important policy matters in its pending IP-enabled services 
proceeding.
    But I believe that Congress ultimately has the responsibility to 
definitively create the proper framework to ensure that this facilities 
based competition in the VoIP marketplace is allowed to flourish--free 
from government management--for the benefit of the consumers.
    And this is part of the mission we hope to accomplish this year, on 
a bipartisan basis, as we seek to modernize our telecommunications 
laws, bringing them up to speed with today's and tomorrow's technology. 
This won't necessarily be an easy task. We will have to grapple with a 
number of thorny issues, such as universal service, interconnection, 
inter carrier compensation, E-911, and disabled access, just to name a 
few. But to paraphrase President Kennedy, we will undertake this 
mission not because it is easy, but because it is hard.
    I want to thank our witnesses for their participation today and 
their efforts to inform our policymaking decisions as we move forward 
legislatively this year.

    Mr. Upton. And I will recognize, for an opening statement, 
my friend and colleague from Pennsylvania, Mr. Doyle.
    Mr. Doyle. Thank you, Mr. Chairman.
    Mr. Chairman, it is no secret that in just a little more 
than a decade of widespread use, the Internet has 
revolutionized our entire way of life. Communications, e-
commerce, personal finance, distance learning, and scientific 
research are only a few of the countless fields that have 
expanded almost as fast as the Internet itself. And as amazing 
as it has been over the last decade to experience and witness 
the new technologies that fueled this growth, I believe we have 
just seen the tip of the iceberg.
    As technology continues to evolve, we all stand to benefit 
with not only new conveniences, devices, and capabilities, but 
also increased competition in almost every industry. And as a 
strong believer in competitive marketplaces because of the 
benefits they provide to consumers, I must say I am excited 
about the effect that Internet protocol-enabled services are 
having on the telecommunications industry.
    Voice-over Internet Protocol is already shaking things up. 
According to a recent study, there were more than 1 million 
VoIP subscribers at the end of 2004, which was 8 times as many 
as just 1 year earlier. A technology research firm predicts 
that there will be 16 million subscribers by 2008.
    With that kind of growth, it is imperative that we address 
some major issues surrounding VoIP in the very near future.
    Because VoIP is so new and different from the way in which 
telephone calls have always been made, we have a unique 
opportunity to use the VoIP issue to set some important 
precedence for the future of the telecommunications industry. 
For a while, it seemed that the biggest issues seemed to be who 
should have the right to regulate VoIP services. And while I 
believe that the FCC acted correctly in declaring these 
services as interstate in nature and therefore not subject to 
State regulation, I remain sensitive to some of the issues that 
have been raised by State public utility commissioners.
    Most notably, I believe there is a need for an effective 
and reliable E-911 network. My instinct tells me that 
technology will eventually solve this problem, but the tragic 
incident in Houston that Mr. Melcher will testify about makes a 
pretty strong case for close government scrutiny of E-911 
functionality.
    The fees that telecommunication companies pay into the 
Universal Service Fund or must pay to each other in connection 
charges will always be vitally important to promoting 
competition in the industry. As we consider how these fees 
should relate to VoIP technology, we must do so carefully so 
that we do not slow its growth as a significant driver of 
competition within the industry.
    There are, of course, countless other important issues we 
have to address if we truly want a competitive industry. It is 
clear to me, though, that we are on the cusp of seeing an 
industry-wide transformation driven by the promise of VoIP.
    I also want to thank our witnesses for agreeing to appear 
before us to testify today. I look forward to hearing your 
views on the promises and risks we face as we move forward in 
the process.
    Mr. Chairman, I thank you, and I yield back the balance of 
my time.
    Mr. Upton. Thank you.
    Mr. Shimkus.
    Mr. Shimkus. Thank you, Mr. Chairman.
    Three brief points. We know that many 911 calls over Voice-
over Internet Protocol are not being sent to the appropriate 
piece apps, and we know that the public expects that when a 911 
call is made that it will go to the appropriate emergency 
responders.
    With that, Mr. Chairman, I ask unanimous consent to submit 
the consumer alert posted by the Attorney General from the 
State of Texas over this issue.
    Mr. Upton. Without objection.
    [The information is available at: http://
www.oag.state.tx.us/alerts/alerts_view.php?id=79&type=1]
    Mr. Shimkus. And the other point that I just want to 
highlight is people in rural America are really going to be 
concerned that this accessibility of this technology will never 
roll out to them, and representing 30 counties in the southern 
part of the State of Illinois, of course, I have to raise that 
issue.
    With that, Mr. Chairman, thank you, and I yield back.
    Mr. Upton. Thank you.
    Mr. Dingell.
    Mr. Dingell. Mr. Chairman, I thank you, and I commend you 
for holding this hearing.
    Voice-over Internet Protocol, VoIP, technology is 
profoundly changing the telecommunications marketplaces. Many 
predict that VoIP services will soon replace telephony as we 
know it as the dominant method of voice communications. If so, 
consumers stand to benefit from the greater competition, lower 
prices, and exciting new applications that VoIP promises.
    As VoIP and other breathtaking technologies take hold, 
policymakers must ensure the telecommunications laws keep pace 
and provide appropriate boundaries and guidance. Skepticism 
about over-regulation is a good way to start. I agree that it 
would be foolish to impose Title II common carrier regulation 
in its entirety on VoIP service offerings. Imposing legacy 
economic regulation runs the risk of stifling competition, 
innovation, and investment. Indeed, Congress anticipated that 
changes in technology might soon undermine the need for certain 
common carrier-type regulations when it granted forbearance 
authority to the Federal Communications Commission.
    Some, however, would prefer not to use those tools 
effectively. Instead, they would classify VoIP as an 
unregulated information service subject only to the unspoken 
whims of FCC's Title I authority. I am troubled by this rush to 
remove all regulations. The FCC may well find that Title I, 
especially as interpreted by the courts, lacks the tools 
necessary to protect consumers. For example, when the FCC was 
recently called upon to stop a carrier from blocking another's 
VoIP calls, the Commission instinctively turned to its familiar 
Title II authority.
    As we consider modernizing the Telecommunications Act and 
the FCC continues studying the proper regulatory regime for IP-
related and enabled services, several overriding public 
principles must not be compromised.
    First, there have long been social obligations attached to 
our system of communications which remain critical in an IP 
environment. These include preserving universal service, 
emergency services, law enforcement, and disability access.
    Second, other requirements have been necessary to ensure 
fair competition and an efficient overall telecommunication 
system. Baseline interconnection, intercarrier compensation, 
numbering, and access requirements may need to be applied in 
this new environment.
    Third, as we move forward, we should not take any action 
which would disrupt the ability of States to perform core 
consumer protection functions. These key policy principles are 
not dependent upon a switch-based architecture, so I commend 
those in the VoIP industry who are using their skills and 
rising to their broader social responsibility.
    Unfortunately, some providers are shirking their duties and 
consumers are suffering the consequences. As we will hear 
today, the dialing of 911 through some VoIP services does not 
properly connect consumers to emergency services. It is 
critical that all industry players work together to find a VoIP 
E-911 solution. Consumers must not be put in the position of 
discovering the lack of 911 functionality too late or in the 
midst of desperate circumstances.
    I hope that our witnesses will speak to the progress they 
are making to achieve these goals. As we reflect on the 
transformative nature of new communications technologies, we 
can not wipe away the core foundations that sustain our 
communications system for the benefit of all of our citizens.
    And I would remind my colleagues on the committee and our 
witnesses that as we move in this direction, we must go in a 
fair direction. We must see to it that we treat all in the 
industry fairly and that the system which evolves through our 
leadership and the work of the Commission is one which, in 
fact, will work fairly to allow the market to achieve the kind 
of competition and the kind of result that will enable this 
country to best take advantage of the very best opportunities 
that exist in a competitive marketplace instead of having the 
kind of stultifying things, which we have seen of late 
happening through the unfortunate behavior of the FCC.
    Mr. Chairman, I thank you for your kindness in recognizing 
me.
    Mr. Upton. Thank you very much.
    Mr. Pickering.
    Mr. Pickering. Mr. Chairman, I thank you for your 
leadership on this issue and for the hearing today.
    I want to just open with a little context of where we have 
been, where we are, and where we hope to get.
    As you all know, we, on a very bipartisan basis, in the 
last Congress joined together in a very broad support across 
Congress to encourage the FCC to make sure that Voice-over 
Internet Protocol, that application was considered solely an 
interstate or Federal jurisdiction. The FCC took that action. 
And as we come in this Congress now to look at where we need to 
go, not only to codify and give certainty to the FCC decision 
on the preemption as it relates to voice, but in the broader 
context of all IP-related applications, the rights and the 
responsibilities as it relates to law enforcement, E-911 to 
universal service to what degree if IP networks or applications 
interact with PSTN, should there and under what formula should 
there be contributions to U.S. health.
    Then as we look at the responsibilities in that regard, it 
is critical that we also address intercarrier compensation. And 
I think that any effort to address IP should also try to solve 
the intercarrier compensation issue as a way to clear that or 
give certainty to the compensation of networks and applications 
as we move forward.
    The other issue that I think will be critical and will be 
highlighted today will be the need for interconnection. If we 
are going to have Voice-over Internet, we must have 
interconnection to be able to complete a 911 call. So the 
interconnection and the numbering, this is an opportunity for 
us to create the healthy environment for competition, for 
innovation, and for investment. But this is very critical that 
we get it right. I look forward to working with Chairman Upton, 
Chairman Barton, Congressmen Stearns and Boucher as we work 
together to find consistence on this committee.
    And to that end, I plan to introduce legislation as we 
return from the April recess, that will address the issues that 
I believe that are important, finding the right, if you would 
call it, pragmatic partnership with States and localities for 
what should be regulated at the State but at the same time 
removing all barriers to entry so that we can have the 
certainty of investment with IP-related interconnections. The 
rights and the responsibilities, and then, as we move forward, 
what access to networks should be maintained as we make sure 
that in the new world where we have major mergers taking place, 
that there is the access and the interconnection that will 
guarantee--and the interoperability that will guarantee 
competition of networks and applications in the future.
    I look forward to working with every member of this 
committee as I introduce the legislation and then as we move 
forward, Mr. Chairman, to find the common ground on a good, 
competitive investment and innovation strategy for the future 
of the Internet and telecommunications.
    Thank you, Mr. Chairman.
    Mr. Upton. Thank you.
    Mr. Markey.
    Mr. Markey. I thank the chairman. And I thank you so much 
for holding this hearing.
    The Internet-Protocol-based telecommunications services 
continue to make inroads into markets traditionally served 
through older technologies. These digital service offerings are 
exactly the kind of innovative broadband services the 
Telecommunications Act of 1996 was intended to unleash.
    Over and over again, in 1994, 1995, and 1996, we had this 
conversation about how the Telecommunications Act would create 
the new digital era. And now we are 8 years deep into it, and 
it is great that we can just continue this conversation. And it 
was because of the all-content voice, video, data, or a 
combination that can now be expressed in packets of zeros and 
ones that these digital packets can be delivered almost over 
any broadband telecommunications infrastructure. The first 
hearing we had on that was back in 1989, 1990 that we would 
move to packet switching. The company which invented it that 
built the Internet was hired to do the Internet. It was up in 
my Congressional District. We had the hearings down here 
talking about how we would move to packet switching in 1989 and 
1990.
    These Internet-based technologies are buffeting many of the 
incumbent marketplace participants across many industries. In 
the telephone market, consumers stand to benefit from advances 
in technology, such as VoIP, which possess the ability to bring 
additional features and services and lower costs to what we 
once called plain old telephone service.
    Policy makers need to foster initiatives that promote 
greater broadband competition. Such competition is necessary to 
drive broadband access prices for consumers lower. The whole 
key to the deployment of this broadband technology has been 
robust, market-based, Darwinian, paranoia-inducing competition. 
The Bells had invented broadband DSL back 20 years before but 
still hadn't deployed it until we introduced competition. And 
this committee did it, and they should be proud of it.
    If VoIP providers are assured unfettered access to the 
consumer broadband marketplace, competition can flourish in a 
way that encourages innovation and price compassion. Consumers 
certainly deserve access to new Internet-based services, such 
as VoIP. Consumers also deserve to receive these services from 
multiple providers so that they benefit not only from access to 
these new technologies, but also from improved service quality 
and lower prices.
    Yet consumers must also retain the important consumer 
protections developed over the years for these services. 
Consumer protections must be something that goes hand-in-hand 
with technological innovation, and this committee has done it 
over the last 70 years, and I know this committee is up to 
doing it once again to create that package of benefits for 
consumers. Just because some company delivering a 
telecommunications service utilizes a new technology to deliver 
it doesn't mean that the nature of the service itself changes, 
from a consumer standpoint. The need for consumer privacy 
rules, billing protections, fraud protections, emergency 911 
services, law enforcement access, or ensuring affordable, 
residential service does not disappear simply because a voice 
call travels in packets rather than in dedicated circuits. We 
all know that on this committee. This is the expert committee. 
We know that dedicated circuits and packets are all the same, 
from the perspective of the consumer in terms of what they are 
expecting.
    Public safety and public interests are directly implicated 
by the lack of some of these rules for the VoIP marketplace. 
The Commission's ad hoc regulatory classifications over the 
last few years have left providers without clear obligations or 
clear rights and have left consumers without adequate consumer 
protection and disclosure, particularly as it pertains to 
emergency 911 service.
    Today's hearing will provide us with an excellent 
opportunity to hear how the industry is confronting the rise of 
Internet telephony and allow us over the coming months to gauge 
whether any changes are necessary to existing 
telecommunications statutes or whether adjustments in this area 
is solely needed to regulatory interpretations of existing 
laws.
    Mr. Chairman, I thank you for this all-important hearing.
    Mr. Upton. Right on the nose, 5 minutes.
    Ms. Wilson.
    Ms. Wilson. Thank you, Mr. Chairman. I look forward to this 
hearing today, and thank you for holding it, because some of 
the issues that we are facing in this subcommittee are 
important ones and they will determine how quickly this 
technology can be available to consumers and how much choice 
people really get when we are changing the way we communicate 
with each other. And there are also--there are some challenges 
that we need to meet in order to make sure that consumers have 
low-cost service and a lot of variety and new technologies to 
communicate with each other. Certainly one that has been 
mentioned already is emergency response and making sure that 
these new technologies integrate well with the emergency 
response system so that no matter what kind of a phone you are 
using, you can connect with the police or the fire department 
that is near you. And we need to make sure that happens.
    The second area that concerns me and many folks in the 
State of New Mexico is how these new technologies will affect 
service in rural areas. And we have--we made a policy decision 
a long time ago when everybody was still on party lines and 
hanging up their telephones on the wall that we should have 
universal service to telephones across America. And that policy 
decision I think still holds today, irrespective of the change 
in technology.
    So we need to make sure that as people migrate to new 
technologies, like Voice-over Internet Protocol, how do we make 
sure that the mechanisms are still there to make sure that you 
can still get phone service of some type in New Mexico. And 
that is an important--that will probably require some statutory 
and regulatory change.
    And the third thing is consumer choice. What is driving all 
of this is Americans' desire to have new technologies, new 
services at a lower cost, and that means in some way we may 
need to make sure that these new technologies have access to 
the network, that they can hook up to the network that is there 
so that innovative technologies--that you have an option to 
plug in your Internet Protocol phone and that will work, 
because as a requirement for whoever owns the wires in your 
street, to let you plug in.
    So those issues we are going to have to deal with here in 
this committee. I look forward to hearing what you all have to 
say about where these technologies are going and what consumers 
in America want.
    And I thank you again, Mr. Chairman, for holding this 
hearing.
    Mr. Upton. Mr. Stupak.
    Mr. Stupak. Thank you, Mr. Chairman, and thank you for 
pledging to hold a series of hearings on how Internet Protocol-
enabling services are changing the communications world. And 
thank you for focusing today's hearing on the Voice-over 
Internet Protocol, or VoIP.
    VoIP and other emerging technologies hold great promise, 
and our communications law should reflect that promise. At the 
same time, any changes to the Telecommunications Act must take 
into account the challenges of providing communications 
services in rural America.
    As we talk about VoIP today, we must remember that VoIP is 
meaningless without broadband.
    Let me share how broadband is coming to part of my 
District.
    The Upper Peninsula of my District has 200 communities, the 
biggest city being the city of Marquette, with only 20,000 
people. In 2003, 80 communities had access to broadband. By 
2005, that number had grown to 120 communities. I know that 
number will continue to climb, because communities realize what 
is at stake.
    Just as towns bypassed by railroads became the ghost towns 
of the 19th century, towns without broadband will have no place 
in today's world. Simply put, rural communities will invest in 
broadband or they will become the ghost towns of the 21st 
century.
    The communities of my District have worked hard to bring 
broadband home. They have used cable, DSL, wireless, and even 
satellite to do it. We have Wi-Max systems on top of water 
towers connecting to Wi-Max systems on neighboring water towers 
connected to cable or DSL. Necessity has fostered ingenuity.
    But ingenuity alone will not and can not bring broadband to 
rural America. Rural America needs a strong universal service 
system that is responsive to its needs and is well funded. 
Broadband came to the Upper Peninsula through the USF funds. 
USF funds were used to link all 15 hospitals in the Upper 
Peninsula and to link 45 libraries as well as to bring long 
distance learning to schools. At the same time, the incumbent 
carriers in my District heavily depend on the universal service 
and access charges to maintain and upgrade their systems and to 
provide broadband themselves.
    Dedication of the small, independent, incumbent carriers 
have made them innovators. While SBC waited until a year ago to 
bring broadband to the Upper Peninsula for economic reasons, 
the small, independent carriers and cable have been providing 
broadband for more than 3 years.
    The communities of my District depend on independent 
incumbents for broadband. But these carriers depend upon 
universal service and the intercarrier compensation to survive.
    Therefore, the first rule of any reform must be, first, do 
no harm to universal service and intercarrier compensation. We 
need to address the funding challenges to USF in a way that 
does not shrink the pot. We need comprehensive reform of the 
intercarrier compensation system in a way that recognizes the 
dependence of these funds by our rural providers who go where 
no one else wants to go and provide some of the most 
progressive telecommunications services.
    We must also look at ways to embrace new technologies that 
can help rural America become an equal partner in this digital 
revolution. It is time all communities in my District and other 
areas of rural America are connected to the future.
    Mr. Chairman, thank you for holding this hearing, and I 
look forward to future hearings on this issue. And I will be in 
and out since we have got three hearings all scheduled at the 
same time.
    Mr. Upton. That is why we are against cloning.
    Mr. Barton.
    Chairman Barton. Thank you, Mr. Chairman.
    We would like to thank you for holding the hearing today. 
Voice-over Internet Protocol, or VoIP, is a revolutionary 
technology. It has begun to have a revolutionary effect on the 
telecommunications industry. VoIP's services are slowly but 
surely entering the mainstream. This hearing isn't an ad for 
Vonage, but it is worth pointing out how that pioneer company 
has over half a million telephone customers now thanks to its 
inside innovation. Cable companies like Cablevision and Time 
Warner are beginning to also offer VoIP services to everybody 
they know. Comcast plans to offer its version of VoIP to 95 
percent of its network by the end of this year, I am told.
    Regardless of who offers it, we want all Americans to have 
the option to pick up their telephones and talk to one another 
over the Internet as if they were talking over phone lines, 
only cheaper. Voice communication is only the beginning.
    VoIP is the baby that the Internet left out on our 
doorstep. It is up to us to raise it. If we don't smother it 
with stacks of loving regulations, it will grow up and make us 
proud. As VoIP goes mainstream, Congress and the FCC need to 
ensure that the proper regulatory framework is in place so that 
VoIP's services can thrive.
    Last November, the FCC took the right step, at least in my 
opinion, in declaring the VoIP services to be interstate, 
subject to the FCC's exclusive authority. That ruling ensures 
that the fledgling VoIP providers will not be bogged down with 
52 potentially different sets of regulations governing VoIP. 
The FCC in its IP-enabled services proceeding also has a number 
of other policy-related decisions to make.
    This year, it is my intention to work with Chairman Upton, 
Mr. Dingell, Mr. Markey, and other members of this committee to 
craft legislation that reflects how much technology has changed 
the communication industry and the manner in which that 
industry should be regulated. This committee will have a number 
of decisions to make regarding policy issues surrounding the 
deployment of VoIP services. For example, should Congress 
statutorily declare VoIP services to be interstate? How should 
VoIP's services be classified? Should VoIP providers have the 
right to interconnect with the public switch telephone 
networks? Should VoIP providers contribute to universal 
service? What should be the compensation scheme between VoIP 
providers and telephone companies? Should VoIP providers be 
required to provide any 911 services? And how can Congress 
ensure that consumers have the freedom to use whatever VoIP 
provider they want without interference from the underlying 
broadband provider? These are all important questions and 
deserve serious consideration.
    I hope that our witnesses today can help shed some light on 
these issues faced by our committee. I look forward to the 
testimony. I want to thank each of you for being here today.
    [The prepared statement of Hon. Joe Barton follows:]

   Prepared Statement of Hon. Joe Barton, Chairman, House Energy and 
                           Commerce Committee

    Mr. Chairman, thank you for holding this hearing today. Voice over 
Internet Protocol, or VoIP, is a revolutionary technology that has 
begun to have a revolutionary effect on the communications industry.
    VoIP services are slowly but surely entering the mainstream. This 
hearing isn't an ad for Vonage, but it sure is worth pointing out how 
that pioneer company now has half a million telephone customers, thanks 
to its insight and innovation. Now cable companies like Cablevision and 
Time Warner are offering VoIP services to everybody they know. Comcast 
plans to offer its version of VoIP throughout 95 percent of its network 
by the end of this year.
    Regardless of who offers it, we want all Americans to have the 
option to pick up their telephones and talk to one another over the 
Internet as if they were talking over phone lines, only cheaper. And 
voice communication is only the beginning.
    VoIP is a baby that the Internet left on our doorstep. It's up to 
us to raise it. If we don't smother it with stacks of loving 
regulations, it will grow up and make us proud.
    As VoIP goes mainstream, Congress and the FCC need to ensure that 
the proper regulatory framework is in place so VoIP services can 
thrive. Last November, the FCC took the right step in declaring VoIP 
services to be interstate, subject to the FCC's exclusive authority.
    That ruling ensures that fledgling VoIP providers will not be 
bogged down with 52 potentially different sets of regulations governing 
VoIP services. The FCC, in its IP-enabled services proceeding, also has 
a number of other policy-related decisions to make.
    This year, it is my intention to work with Chairman Upton, Mr. 
Dingell, Mr. Markey, and other Members of the Committee to craft 
legislation that reflects how much technology has changed the 
communications industry and the manner in which the industry should be 
regulated. This Committee will have a number of decisions to make 
regarding policy issues surrounding the deployment of VoIP services.
    For example, should Congress statutorily declare VoIP services to 
be interstate? How should VoIP services be classified? Should VoIP 
providers have the right to interconnect with the Public Switched 
Telephone Network (PSTN)? Should VoIP providers contribute to universal 
service? What should the compensation scheme be between VoIP providers 
and telephone companies? Should VoIP providers be required to provide 
E911 services? And how can Congress ensure that consumers have the 
freedom to use whatever VoIP provider they want without interference 
from the underlying broadband provider?
    I hope our witnesses will shed some light today on these and other 
issues faced by our Committee. I look forward to the testimony of our 
witnesses and I thank them for participating in today's hearing.

    Chairman Barton. Thank you, Mr. Chairman.
    Mr. Upton. Mr. Brown.
    Mr. Brown. Thank you, Mr. Chairman, and thanks to our 
witnesses for joining us this morning. I especially appreciate 
Ms. Puckett's suggestions in her testimony. Thank you for that.
    VoIP is one of many new innovative technologies that is 
rapidly expanding and creating greater competition in the voice 
market. Investment in these technologies can truly be 
beneficial to everyone. While it is clearly important to 
support the emergence and success of these new technologies, 
affordable access to existing technologies should also be a 
priority. One clear example of the need to ensure affordable 
access to VoIP, which is inexorably tied to the availability of 
broadband, without a broadband connection, you can not use 
VoIP.
    As companies roll out their new services, their focus is 
predominantly on the most profitable customers and markets. 
Consumers in low-income and rural communities must not be 
squeezed out of this marketplace. If these customers can't gain 
access to affordable technologies and services, they lose 
ground in their ability to develop the skills necessary for 
higher paying jobs. And if small businesses can't gain access 
to new technologies, they lose the ability to compete and grow 
in today's more difficult economy. It is not only a consumer 
access issue, it is an economic development issue.
    It is now more important than ever to preserve universal 
service and the e-rate program. These programs have provided 
not only crucial Internet access to schools and libraries in 
all of our Districts, but simple basic phone service to those 
who can least afford it but perhaps need it most.
    I look forward to working with my committee colleagues to 
ensure everyone affordable access.
    Thank you, Mr. Chairman.
    Mr. Upton. Mr. Bass.
    Mr. Bass. Thank you, Mr. Chairman.
    And rather than repeat what has already been said, I would 
simply like to say that I certainly agree wholeheartedly with 
the good remarks of my colleagues from Texas and New Mexico and 
Michigan, Massachusetts. I think the issues have been very 
clearly outlined today, and I am look forward to hearing from 
the witnesses.
    Mr. Upton. Mr. Gonzalez.
    Mr. Gonzalez. I will waive.
    Mr. Upton. Mr. Towns.
    Mr. Towns. Thank you very much, Mr. Chairman.
    The landscape of the telecommunications industry is 
changing rapidly due to the ramifications and development of 
Voice-over Internet Protocol.
    I would like to welcome, of course, the witnesses today, 
especially Tom Rutledge, the Chief Operating Officer from 
Cablevision in New York. Delighted.
    Cablevision is offering voice video data services to many 
of our constituents and should also be recommended--or actually 
commended for taking the initiative early on to solve the 911 
issue for voice subscribers.
    While still in the beginning stage, adoption of Voice-over 
Internet Protocol is rapidly growing. And widespread adoption 
is expected with the next few years. As we look--put in the 
horizon and try to predict the development of this new service, 
I believe we should strive for a regulatory framework that 
protects consumers while still encouraging investment, 
innovation, and competition.
    I am pleased that most companies offering Voice-over 
Internet Protocol recognize that we must balance the need to 
promote the technology with the need to protect consumers at 
the same time. The question is where is the balance. For me, 
when it comes to 911 services, I strongly believe that all 
voice providers must be able to provide this service. Consumers 
have come to expect this service, and the future of someone's 
life should not depend on who their phone service provider is. 
To encourage investment, companies must operate under a 
predictable, national framework for services pricing and 
intercarrier compensation.
    Finally, as we work toward a framework that levels the 
playing field among all telecommunication competitors, I am not 
convinced, at this point, that we can foster the most 
competitive environment by just tackling Voice-over Internet 
Protocol or whether a broader approach to what all Internet 
service is needed.
    Thank you very much, Mr. Chairman, and I look forward to 
hearing from our witnesses.
    On that note, I yield back.
    Mr. Upton. Mr. Terry.
    Mr. Terry. I waive.
    Mr. Upton. Mr. Ferguson.
    Mr. Ferguson. Thank you, Mr. Chairman. I appreciate you 
holding this hearing.
    This year, we certainly have our work cut out for us as we 
take on a considerable task of updating and modernizing our 
telecommunications laws for the information age. The advent of 
Internet has changed the way Americans communicate in countless 
and exciting ways, and as a result, is changing the landscape 
of the telecommunications marketplace.
    Traditional voice telecommunication services are no longer 
the only avenues open to consumers, and Voice-over Internet 
Protocol services are becoming an attractive, efficient, and 
affordable option. Along with the rise of VoIP services comes a 
wide array of policy issues that this subcommittee will need to 
consider and ultimately decide on as we revisit our 
telecommunications laws.
    What comes to mind first and foremost is if, how, or when 
should web services be regulated, specifically, whether VoIP 
should contribute to the Universal Service Fund and whether 
they should be required to pay access charges to local exchange 
carriers to originate or terminate long distance calls as long 
distance carriers currently do.
    Another facet we must consider is the public safety impact, 
how VoIP services will develop E-911 capability, and whether 
current laws enabling law enforcement to intercept and gather 
call information will apply to VoIP services are two important 
issues we must discuss.
    I thank you again, Mr. Chairman Upton, for providing 
another opportunity for this subcommittee to discuss, learn, 
and debate the impact and future of IP-enabled services, and I 
look forward to hearing the perspectives of the witnesses 
before us today.
    I yield back.
    Mr. Upton. Thank you.
    Mr. Inslee.
    Mr. Inslee. I will waive.
    Mr. Upton. Mr. Wynn.
    Mr. Wynn. I will waive, also.
    Mr. Upton. Mr. Whitfield.
    Mr. Whitfield. I will waive.
    Mr. Upton. Well, thank you. Thank you all for your 
testimony.
    At this point, we will move to our witness list. We 
appreciate----
    Mr. Walden. Mr. Chairman.
    Mr. Upton. Oh, oh. Mr. Walden is recognized for an opening 
statement.
    Mr. Walden. Thank you, Mr. Chairman. I will make it real 
brief, because they--a lot of these issues have been covered, 
but I am looking forward to hearing from our witnesses on a 
number of fronts, including reliability of VoIP, especially in 
emergencies, how we are going to deal with USF issues and 
payment into USF. Online security issues with VoIP, do we face 
the same kind of hacking issues there that we see with other 
computer programs for identity theft and all. Interconnection 
issues, what happens if VoIP is determined an info service 
versus a telecommunication service? These issues are consumer--
ability to fight back, frankly, when there are multiple 
entities involved in connecting your phone, how do we get 
around the blame game that can occur, has occurred? I have seen 
it in my own business, in other areas, and it is something I 
think consumers have a definite need to be able to turn 
somewhere to get relief. And finally, the intercarrier 
compensation issue are all that I think are important.
    Mr. Chairman, I appreciate your holding this hearing, and I 
will sum it up with that.
    Mr. Upton. We have a place for you up here if you would 
like to move.
    Mr. Walden. No, it is fine.
    Mr. Upton. All right.
    Mr. Walden. Closer to the action here, Mr. Chairman.
    Mr. Upton. You are not going to be able to see that 
placard.
    Well, at this point, opening statements are concluded, and 
I will make unanimous consent that all members not present at 
the moment are able to insert their statements as part of the 
record.
    [Additional statements submitted for the record follow:]

Prepared Statement of Hon. Cliff Stearns, a Representative in Congress 
                       from the State of Florida

    Mr. Chairman, thank you for holding this hearing on Voice-over 
Internet Protocol, a technology that promises to give American 
consumers more choices and cheaper services.
    Obviously, the treatment of these IP services will be a key area of 
focus for us as we revisit the 1996 Telecom Act, and it's critical that 
we get it done right. This is especially true when it comes to Internet 
telephony.
    Thousands of Americans are signing up to use VoIP services each 
week, and the number of users has nearly tripled over the last three 
years. According to estimates, there will be between 17-20 million VoIP 
subcribers by 2008. The recent news that several prominent companies 
will start providing VoIP services for their customers should only help 
speed along these numbers.
    Imagine how much more explosive this growth will become once we are 
able to expand broadband deployment and establish a national framework 
that provides legal and regulatory certainty in this arena.
    That's why I was pleased to recently introduce legislation with my 
colleague from Virginia, Congressman Boucher, which proposes to provide 
an interstate framework of certainty not just for voice services, but 
also for video, data, high-speed services and whatever IP services that 
may come along in the future.
    Five or ten years ago, it wasn't readily apparent that VoIP would 
be the killer application that it is today. We still don't fully know 
what other IP applications will be the ``next big thing'' down the 
road. As such, we might want to consider an approach that applies to 
IP-enabled services in general rather than each individual application, 
so that this innovative technology can be allowed to grow and flourish.
    So our point would be, as we take another look at our 
telecommunications laws, why shouldn't we make it as flexible and as 
anticipatory as we possibly can? The fact is that VOIP and other IP 
services are revolutionizing the telecommunications landscape, and we 
should think about modernizing our laws to face this reality. Maybe the 
conventional way of thinking isn't adequate. These are the type of 
questions that I hope to hear about in this hearing and the others to 
come.
    Mr. Chairman, thank you for holding this hearing, and I am looking 
forward to hearing from the witnesses that we have here today, because 
they are the ones who are dealing with this emerging technology every 
day.
                                 ______
                                 
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress 
                       from the State of Wyoming

    Thank you, Mr. Chairman.
    I'm pleased the Committee is continuing to examine how Internet 
Protocol (IP)-enabled services are changing the landscape of 
communications, today and in the not-too-distant future. The use of 
``information packets'' has profoundly affected how we communicate, and 
will soon affect a wide array of advanced services.
    This requires that Congress look at the legacy regulations that are 
crumbling under our feet as these technologies emerge, and act 
proactively to ensure all consumers--even those in the most remote 
corner of Wyoming--are served. I am one who believes in the promise of 
IP and how it can improve the choice and rich selection of competitive 
services for consumers.
    Still, we need to ensure that innovation is rewarded. We need to 
ensure that the infrastructure is ubiquitous. And we need to ensure 
that one platform is not favored over another.
    The lines between voice, video and data communications will soon be 
a memory. The challenge for Congress as we tackle changes to this 
nearly 10-year old law, is to ensure that those of us in rural America 
are not left using 19th Century technology in a 21st Century world, and 
that in so doing, we not crush innovations with oppressive 
restrictions.
    I look forward to hearing from our distinguished panel on these 
matters Today and want to continue our dialog as we tackle legislation 
addressing these matters.
    I yield back the balance of my time.

                                 ______
                                 
 Prepared Statement of Hon. Eliot Engel, a Representative in Congress 
                       from the State of New York

    Mr. Chairman: Thank you for recognizing me and thank you for 
holding this hearing.
    I understand that members of the John family from Houston are in 
the audience. I want to express my sympathies for the pain your family 
has endured. I also want you to know that as we move forward I am 
personally pledged to ensure that every company that provides voice 
telephone services WILL be compatible with 911. PERIOD.
    Mr. Chairman, we have much work to do this year if we are to write 
a comprehensive bill that provides the clear, level playing field to 
all players in this great industry.
    The need for a more comprehensive rewrite versus a limited one is 
exemplified by the number one issue we all agree on--regardless of 
party or where we come from--911 compatibility.
    One of the companies before us today, Cablevision, which provides 
services to about 90% of my district, is fully compatible with the 911 
systems with their VOIP service. They accomplish this by handing off 
all their calls to a CLEC, who then transfers these calls throughout 
the POTS--plain old telephone system.
    I applaud Cablevision for their efforts. They are serving as an 
example of a VOIP provider doing the right thing.
    However, the Chairman of the full Committee, as an engineer 
himself, might not be as appreciative because they have chosen a 
solution that is not elegant.
    Engineers are always looking for an elegant solution. (PAUSE) But, 
we in Congress make sausage!!!
    I would argue that to solve what are more regulatory problems than 
technical problems, Cablevision has set up its CLEC so that it would 
have a clear framework in law and regulation to operate within. In 
terms of compliance with 911, this provides an interconnect guarantee. 
However, if they were just a VOIP provider, they would not enjoy the 
benefit of a right to interconnect.
    Thus, we in Congress expect and will soon legislate that VOIP be 
911 compatible. But, right now they do not have the legal right to 
fulfill this responsibility.
    Yet I believe the elegant solution would be that Cablevision as a 
company could be providing a suite of ``communications services'' and 
not have to create subsidiaries to assist.
    In fact, whether it is a cable, satellite or traditional telephone 
company--all are able to provide voice, video and data communication 
services.
    We should provide a regulatory framework for the delivery of like 
services--not a different framework based on how those services are 
delivered to the consumer.
    I look forward to hearing the testimony from these witnesses.

                                 ______
                                 
 Prepared Statement of Hon. Bart Gordon, a Representative in Congress 
                      from the State of Tennessee

    Thank you Mr. Chairman,
    Telephones plays a unique and critical role in our society. Simply 
put, consumers rely on them to call for help.
    If public safety obligations should apply to new IP enabled 
telephony services, and I believe there is consensus that they should, 
then these new services also should have the right to fully access the 
existing 911 system.
    I am working on legislation to clear those policy barriers that can 
be cleared at the federal level to make sure that all IP enabled 
telephony providers can provide basic 911 callback number and location 
information services as quickly as possible.
    This provides a competitive level playing field and is essential if 
IP enabled phone services are to be widely accepted by consumers as 
replacement for their traditional phone service.
    Going forward, the new technologies hold the potential of providing 
better 911 services. For example, eventually a caller may be able to 
alert a 911 call center that they are Spanish speaking so translator 
services can be arranged. The good news, 911 deployments in the past, 
the equipment manufacturers, telephone providers and the 911 industry 
are working together on next generation of 911 deployment.
    I look forward to the testimony of the witnesses on this issue.

    Mr. Upton. Witnesses, we appreciate your submitting your 
testimony in advance, so we were able to look through it last 
night. At this point, we are joined by the following witnesses: 
Mr. Paul Erickson, Chairman of SunRocket; Mr. Carl Grivner, CEO 
of XO Communications; Mr. John Melcher, Executive Director of 
the Greater Harris County 911 Emergency Network; Ms. Karen 
Puckett, President and COO of CenturyTel; Mr. Thomas Rutledge, 
COO of Cablevision, no questions about the Knicks today, I want 
you to know; and Mr. Mark Shlanta, CEO of the South Dakota 
Network Communications. We welcome all of you, and we would 
like you to limit your remarks to no more than 5 minutes. Your 
testimony is made part of the record in its entirety.
    I will warn you in advance that we are expecting a series 
of votes momentarily, so we will have to break at such a point 
and return, but Mr. Erickson, we will start with you. Welcome.
    You need to hit the mike button as well right there.

   STATEMENTS OF PAUL ERICKSON, CHAIRMAN, SUNROCKET; CARL J. 
   GRIVNER, CHIEF EXECUTIVE OFFICER; XO COMMUNICATIONS; JOHN 
    MELCHER, EXECUTIVE DIRECTOR, GREATER HARRIS COUNTY, 911 
 EMERGENCY NETWORK; KAREN PUCKETT, PRESIDENT, CHIEF OPERATING 
OFFICER, CENTURYTEL, INC.; THOMAS M. RUTLEDGE, CHIEF OPERATING 
  OFFICER, CABLEVISION SYSTEMS CORPORATION; AND MARK SHLANTA, 
  CHIEF EXECUTIVE OFFICER, SOUTH DAKOTA NETWORK COMMUNICATIONS

    Mr. Erickson. Thank you, Mr. Chairman, and members of the 
committee for inviting me to speak before you this morning. My 
name is Paul Erickson, and I am the Chairman and Co-Founder of 
SunRocket, an Internet phone company based in Vienna, Virginia.
    Not long ago, it would have been impossible to create a 
nationwide, residential phone company due to the cost and 
complexity of securing rights of way and building local 
networks reaching into American neighborhoods. Now with the 
surging broadband adoption and the wonders of Internet 
telephony, we can create a high-quality, far-reaching phone 
service that sets new standards in functionality and value. In 
less than a year, with a handful of employees, we built 
SunRocket from a blueprint into a coast-to-coast service 
provider, with thousands of satisfied customers across 38 
States. We offer a full year of home phone service for a flat 
rate of $199, including unlimited local and long distance 
calling, a bucket of free international minutes, a free extra 
phone number, emergency 911 calling, over a dozen free enhanced 
calling features plus all of the necessary equipment you need 
at no extra charge. That is the kind of value and innovation 
that Voice-over IP technology has made possible.
    Our topic today is to discuss how public policy can enable 
and unleash the potential of Voice-over IP technology while 
making certain that consumers are protected, that competition 
is fair and vigorous, and that public safety is ensured. We can 
agree on the goals, but the best policy approach to reach those 
goals depends on your vantagepoint. Contrary to what some 
people think, not all Internet phone companies are looking for 
a free ride or to avoid social and civic responsibilities. At 
SunRocket, we believe that prudent regulation is a very good 
thing. We believe that States should have an active role in 
fostering competition and protecting their citizens. We believe 
that phone companies, whether old or new, regardless of their 
underlying technology, have certain responsibilities to ensure 
public safety and universal connectivity. We believe that these 
things can be achieved without burdensome or oppressive 
regulation or taxation.
    My hope is that we can agree that our first priority is to 
ensure that consumers get what they expect and what they 
deserve. Primarily, they want a choice in providers. They 
recognize that fair competition is the best way to foster 
innovation, low prices, reliable quality, and responsive 
service. The option to switch from company A to company B 
without hassles, penalties, or risk is by far the best way to 
force companies to behave in the best interest of their 
customers. However, Americans do not believe that a choice 
between their legacy cable and phone companies qualifies as 
sufficient competition for home phone service. We recently 
completed a pole of over 2,000 Americans, asking them what they 
wanted from phone and broadband services and what they believed 
about the competition in the category. Only 10 percent of them 
stated that a choice between the phone and cable company for 
home phone service represent a sufficient competition.
    From a consumer standpoint, fairer phone competition 
requires only a few basic things. Consumers don't care about 
things like intercarrier compensation, subsidies, or cost 
recoveries, but they do care about their phone number. If they 
want to switch phone companies, they want their phone number to 
transfer flawlessly, immediately, with no effort on their part. 
Today, the process of moving a phone number from an incumbent 
phone company to an Internet phone company can take weeks if it 
can be done at all.
    Fairer competition also means that they can switch phone 
companies without facing outages and inconveniences associated 
with other household services that they rely on. That is often 
not the case today. In fact, in most areas, if a DSL customer 
wants to switch to Internet phone service, they are forced to 
go through the hassle of canceling their DSL service and 
installing cable broadband service.
    For the promises of Internet-enabled services to be fully 
realized, we also believe that proactive policy action to 
ensure net neutrality is essential. Today, consumers have 
rarely been subjected to deliberate interference, disruption, 
or blocking of Internet-enabled content and applications, and 
they are extremely passionate about keeping it that way. In the 
recent consumer poll I described earlier, 97 percent of those 
voicing an opinion on this subject said that broadband 
providers should not be allowed to control what they access 
over the Internet other than to protect them from potentially 
harmful computer viruses and block illegal activities. Rarely 
do consumers so universally agree on any subject, which should 
give this committee sufficient reason to act on this point.
    Another critical issue was emergency 911 calling. SunRocket 
has worked to provide our customers with the best 911 service 
that we could profitably provide. Unlike some other Internet 
phone companies, the majority of SunRocket customers are 
enabled with enhanced 911 calling, which automatically delivers 
the name and location information to emergency operators, and 
we are working to extend that capability to all of our 
customers as fast as we can. We would welcome assistance from 
policymakers in enabling Internet phone companies to get fair, 
efficient, and economic access to the existing emergency 911 
infrastructure, and I believe it would be prudent to support 
investments to upgrade that infrastructure to allow emergency 
call centers to benefit from enhanced IP-enabled services. 
Given the criticality of 911 calling and to ensure that 
Internet phone service reaches its full potential, SunRocket 
supports a requirement that all phone companies will issue 
standard phone numbers and offer the capability to place 
outgoing phone calls using standard telephones and must also 
provide 911 service as long as all phone companies have 
efficient and effective access to the existing 911 
infrastructure.
    In conclusion, SunRocket remains committed to bringing 
Internet phone service to mainstream consumers, and we feel 
that part of the role of a consumer champion is to advocate 
sound public policies and ensure the health and future of 
Internet phone service in a regulatory environment that 
protects and advances the social goals of our country.
    I applaud the efforts of this committee to ensure vibrant 
competition, foster innovation, and protect consumers.
    Thank you again for the opportunity to speak with you 
today.
    [The prepared statement of Paul Erickson follows:]

Prepared Statement of Paul Erickson, Chairman and Co-Founder, SunRocket

    Thank you, Mr. Chairman and members of the Committee for inviting 
me to speak before you this morning. My name is Paul Erickson, and I am 
the Chairman and co-founder of SunRocket, an Internet phone service 
provider based in Vienna, Virginia. Prior to creating SunRocket, I 
spent 16 years with MCI in marketing and business strategy roles, and I 
have a great appreciation for the role that policies and regulation 
play in fostering competitive markets and consumer value and 
protection. My career in this industry began prior to the Bell System 
break-up, and I've lived through equal access implementation and the 
creation of long distance competition, the emergence of wireless and 
the Internet, and the reshaping of the global telecom industry. Along 
the way, I designed services that capitalized on changing economics and 
regulation, that brought competition to toll-free and collect calling, 
international long distance and local phone service. I recognize how 
the pieces fit together in this industry, and the enormous potential of 
the Internet to improve, disrupt and transform how we live, work and 
play. I admire and applaud the efforts of this committee to shape the 
policies that will ensure vibrant competition, foster innovation and 
protect consumers.
    Internet phone service has been the subject of much debate, 
discussion, attention, and sometimes, downright hype, over the past 
year. We've read countless articles on how the technology is 
revolutionizing communications, changing the way we work and live, and 
bringing a generation of Internet users into an IP enabled world.
    And by the way, all of this is true.
    Not long ago it would have been impossible to create a nationwide 
residential phone company, due to the cost and complexity of securing 
rights of way and building local networks reaching into American 
neighborhoods. Now with surging broadband adoption and the wonders of 
Internet telephony, we can create a high-quality, far-reaching phone 
service that is better than anything that's out there from a feature, 
price and value perspective. In less than a year with just a handful of 
employees, we built SunRocket from a blueprint into coast-to-coast 
service provider, with thousands of satisfied customers across 38 
states. Our customers pay a flat rate of $199 for an entire year of a 
phone service. And that doesn't just include unlimited local and long 
distance calling. For SunRocket customers, it also means a bucket of 
free international minutes, a free extra phone number, emergency 911 
calling, over a dozen free enhanced calling features, all the necessary 
equipment you need at no extra charge, and just in case, a 31 day risk-
free guarantee. That's the kind of value and innovation that Internet 
telephony has made possible.
    We look at Voice-over-IP as simply an enabling technology, albeit a 
groundbreaking one. But for us, SunRocket isn't about technology. It's 
about creating a far better phone company, one that delivers phone 
service to customers the way they deserve to get it. Innovative 
features that give consumers more control over how they can stay in 
contact with others, and filter out unwanted contacts. Straightforward 
pricing that eliminates phone bill confusion and saves them money. The 
technology, economics, and policy climate for Voice-over-IP finally 
reached the stage where it is ready for prime time, and we were ready 
for it.
    I realize we are not here today to discuss the tremendous benefits 
of Voice-over-IP technology, as most of us already agree on that. Our 
challenge is to figure out how public policy fits into this brave new 
world, how it can enable and unleash the potential of the technology, 
while making certain that consumers are protected, that competition is 
fair and vigorous, and that public safety is ensured. We can agree on 
the goals, but the best policy approach to reach those goals depends on 
your vantage point.
    I think we can all agree that no matter where you stand--on the 
incumbent or new entrant side of the aisle--telecom policy is not so 
black and white anymore. I don't think any of us want to retrofit 
Internet phone service into the existing regulatory scheme we've fought 
over for years. Even if we tried, the technology simply does not allow 
it.
    Contrary to what some people think, not all Internet phone 
companies are looking for a free ride or to avoid social and civic 
responsibilities. At SunRocket, we believe that prudent regulation is a 
good thing. We believe that states should have an active role in 
fostering competition and protecting their citizens. We believe that 
phone companies, whether old or new, regardless of their underlying 
technology, have certain responsibilities to ensure public safety and 
universal connectivity. We believe that these things can be achieved 
without burdensome or oppressive regulation or taxation.
    My hope is that we can agree that our first priority is to ensure 
that consumers get what they expect and deserve. Having managed 
consumer research in this category for over a decade, this comes down 
to just a few simple imperatives.
    First, they want a choice in providers. They recognize the fair 
competition is the best way to foster innovation, low prices, reliable 
quality, and responsive service. The option to switch from company A to 
company B, without hassles, penalties, or risk, is by far the best way 
to force companies to behave in the best interests of their customers. 
Furthermore, Americans do not believe that a choice between their 
existing phone and cable companies for phone service qualifies as 
sufficient competition. We recently completed a poll of over 2,000 
Americans, asking them what they wanted in phone and broadband service, 
and what they believed about the competition in the category. Only 10% 
of them stated that a choice between the phone company and the cable 
company for home phone service was sufficient competition. Three-
quarters of those voicing an opinion said that we need many competitors 
for home phone service, since that will result in the best service at 
the best prices.
    The second thing that consumers expect is that phone companies will 
provide the basics that they've come to expect from home phone service. 
They expect it to work, reliably, 24 by 7. They expect to be able to 
call any phone in the world by dialing a regular phone number. They 
expect 911 to reach an emergency operator, 411 to reach directory 
assistance, and toll-free numbers to be toll-free. They expect to be 
able to block telemarketers from hassling them. They expect their bills 
to be clear and accurate. They don't need to know how all this works. 
They just want it to work.
    Finally, like all taxpayers, they want some relief from the burden 
of taxes, fees, and surcharges that turn an advertised $49 phone plan 
into a $65 monthly bill. Of course, they also recognize that taxes are 
a fact of life--but they would like some way to make sense of it all, 
to be able to compare prices between competitors and to feel 
comfortable that they're getting what they paid for or paying for what 
they requested.
    If we focus on those few things from a policy standpoint, I believe 
we can make a huge leap forward to create a fiercely-competitive yet 
profitable, innovative yet reliable, telecommunications industry. Of 
course, the key is enabling fair competition, so that consumers can 
easily switch from an underperforming provider to an alternative that 
offers a better combination of features, quality, value and behavior.
    From a consumer standpoint, fair phone competition requires only a 
few basic things. They don't care about things like intercarrier 
compensation, subsidies, carrier profits, cost recoveries or details of 
how calls are routed from Boston to Botswana. But they do care about 
their phone number. If they want to switch phone companies, they want 
their phone number to transfer, flawlessly, immediately, with no effort 
on their part. Today, the process of moving a phone number from an 
incumbent phone company to an Internet phone company can take weeks, if 
it can be done at all. We believe that phone numbers should be 
controlled by the customer, and that no phone company has the right to 
hold those numbers hostage for any reason.
    From a consumer standpoint, fair competition also means that they 
can switch phone companies without facing outages or inconveniences 
associated with other household services. That is often not the case 
today. In most areas, incumbent phone companies don't let their DSL 
customers keep their broadband, cancel their phone service and transfer 
their phone number to an Internet phone company. In order to switch to 
an Internet phone company, DSL customers have to go through the hassle 
of canceling DSL and installing cable modem service. It's easy to 
imagine broadband providers creating anti-competitive pricing 
structures to restrict adoption of Internet-enabled services, and many 
broadband providers are already engaged in the practice, charging huge 
price premiums for standalone broadband service. These practices impede 
the kind of competition that consumers are asking for.
    For the promises of Internet-enabled services to be fully realized, 
we believe proactive policy action to ensure Net Neutrality is 
essential. To date, consumers have rarely been subjected to deliberate 
interference, disruption, or blocking of Internet-enabled content and 
applications, and they are extremely passionate about keeping it that 
way. In the recent consumer poll I described earlier, only 3% of 
Americans think that broadband providers should be allowed to block 
access to services and websites that compete against that company's 
services. 97% of those voicing an opinion said that broadband providers 
should not be allowed to control what they access over the Internet, 
other than to protect them from potentially harmful computer viruses or 
block illegal activities. Rarely do consumers so universally agree on 
any subject, which should give this committee sufficient reason to act 
on this point. Failure to do so could enable broadband providers to 
block Internet-enabled video, voice and information services, which 
would impede the vigorous competition desired by consumers and 
policymakers alike. There is no justification for broadband providers 
to engage in tactics that deliberately impede independent providers of 
voice, video and content services.
    I mentioned earlier that consumers expect certain things from their 
phone company. Perhaps the most critical expectation is emergency 911 
calling. While Internet phone companies are making some progress on 
this front, policymakers can play an important role in ensuring 
consumer safety. SunRocket has worked hard, at significant expense, to 
provide our customers with the best 911 service that we can profitably 
provide. Unlike with some other Internet phone companies, the majority 
of SunRocket customers are enabled with enhanced 911 calling, which 
automatically delivers the name and location information to the 
emergency operators, and we are working to extend that capability to 
all of our customers as fast as we can. All of our customers have 
access to some form of 911 calling, though in some areas we can't 
automatically deliver location information with the call. While the 
inherent mobility of Internet phone service creates challenges to 
properly maintain correct address information, this can be accomplished 
in a number of ways. We would welcome assistance from policymakers in 
enabling Internet phone companies to get fair, efficient, and economic 
access to the existing emergency 911 infrastructure, and believe it 
would be prudent to support investments to upgrade that infrastructure 
to allow emergency call centers to benefit from enhanced IP-enabled 
services.
    Given the criticality of 911 calling and to ensure that Internet 
phone service reaches its full potential, SunRocket would support a 
requirement that all phone companies who issue standard phone numbers 
and offer the capability to place outgoing phone calls using standard 
telephones must also provide 911 service, as long as all phone 
companies have efficient and effective access to the existing 911 
infrastructure. Short of that, for the benefit and safety of consumers, 
at a minimum there should be a mandate that all Voice-over-IP providers 
who do not provide E911 fully disclose that to their customers in an 
obvious and transparent manner.
    Finally, I would like to offer our views on a few other topics that 
often are included in policy debates related to Internet phone service. 
As I mentioned earlier, SunRocket does not expect a free ride. All 
Internet phone companies would agree that fair compensation is required 
for the exchange of traffic between networks. The ongoing debate over 
access charges mostly centers on whether the remaining subsidies baked 
into access charges should be extended to Internet phone traffic. A 
better question is how these subsidies can be removed from all 
intercarrier compensation mechanisms. As you know, this debate has 
raged for years at the FCC, and we can't solve this here, though a 
rational and efficient peering system should be the policy goal.
    A related topic is reform of the Universal Service Fund program. 
Again the jurisdictional and economic issues are complex, but SunRocket 
supports the policy goal of universal access to phone service, and 
believe that the policy goal should be extended to residential high-
speed Internet access as well. In fact, we believe that the universal 
service goal should increasingly be directed toward securing universal 
adoption of residential high-speed Internet access and less on 
maintaining subsidies for legacy telephone services.
    The big questions are how to fund the program, what level of 
support is necessary, and what companies are able to access the funds. 
In 2003, over $3 billion was distributed in high-cost and low-income 
support. That same year, FCC reports show nearly $300 billion in 
industry-wide revenue from wireless and wireline telecommunications. 
While perhaps I have a simplistic view of the situation given 
jurisdictional revenue separations and statute service definitions, but 
it seems like a 1% Universal Service Surcharge applied to all telephone 
and ISP revenue would fully fund that program. Under that kind of 
mechanism, the revenue base is broadened and certain types of customers 
no longer bear a disproportionate amount of the costs. The system would 
define the minimum level of service, and any carrier who qualifies 
would be eligible.
    In conclusion, clearly we have a lot of work to do, but I am 
confident we are all up to the task. SunRocket remains committed to 
bringing Internet phone service to the mainstream consumer and we feel 
that part of the role of a consumer champion is to advocate sound 
public policies that ensure the health and future of VoIP and 
regulatory environment that protects and advances the social goals of 
our country. We look forward to working with you, and again thank you 
for the opportunity to talk with you today.

    Mr. Upton. Thank you.
    Mr. Grivner.

                  STATEMENT OF CARL J. GRIVNER

    Mr. Grivner. Chairman Upton, Ranking Member Markey, and 
members of the subcommittee, thank you for the opportunity to 
testify today regarding Internet Protocol-enabled services and 
their effect on the voice marketplace. My name is Carl Grivner, 
and I am CEO of XO Communications, one of the Nation's largest 
facilities-based providers of telecommunication and broadband 
services.
    Originally formed as Nextlink in 1996, XO is headquartered 
in Reston, Virginia, with 5,000 employees nationwide, has 
expanded its telecommunication offerings from its original 4 
small markets to 70 metro markets in 26 States today. Our 
company provides a comprehensive array of voice and data 
telecommunication services to small, medium, and large 
businesses serving nearly 200,000 business customers. XO 
facilities and services have enabled us to develop into the 
only true national-local exchange carrier. We have invested 
heavily in building our own facilities, spending over $8 
billion and constructing over 1.1 million miles of fiber. We 
have an extensive set of metro fiber rings to connect customers 
to our network, and we own one of the largest and most advanced 
IP nationwide backbones in the industry. Furthermore, XO is 
North America's largest holder of fixed broadband wireless 
licenses covering the 27-gigahertz to 32-gigahertz Local Multi-
point Distribution Service.
    XO is actively working on alternative solutions to the so-
called last mile access. IP-enabled services, like Voice-over 
Internet Protocol, or VoIP, are changing the voice and data 
marketplace. The Internet's explosive growth in recent years 
has focused intensive efforts worldwide on developing advanced 
IP-based networks and applications over existing broadband 
infrastructure. According to the FCC, roughly 32.5 million 
broadband lines connected homes and businesses to the Internet 
as of June 30, 2004. By 2008, residential and business 
broadband subscribers are projected to reach 57 million 
according to the Telecommunications Industry Association.
    As IP-based technology have advanced, so has XO. We have 
one of the largest deployments of Sonus softswitches in the 
country, which serve 44 markets and deliver more than 600 
million minutes of customer long distance traffic each month 
across our IP network.
    Earlier this year, we launched a new industry-leading 
bundled Voice-over Internet Protocol solution that provides our 
customers true VoIP from origination determination over our own 
network coast-to-coast. We offer the scalability and capacity 
that many providers can not match in a comprehensive 
facilities-based offering. According to the market research, 12 
percent of businesses used VoIP in 2004, up from 3 percent in 
2003. With the addition of VoIP, we can expect that number to 
increase in 2005.
    As we examine telecommunications reform, it is important to 
note that companies like XO can not offer these innovative 
services without access to so called last mile bottlenecks at 
reasonable rates and on reasonable terms. XO took the intent of 
the 1996 act to heart and built its own facilities and we 
continue to strive to serve more customers entirely over our 
own network. However, the costs, bill time, and local 
restrictions make it economically prohibitive to build 
alternative, last mile solutions for every customer. Until we 
can provide a more efficient system that is ubiquitous, as the 
legacy copper lines that connect the majority of homes and 
businesses, we will continue to need access to the last mile 
connections. If we eliminate cost-based, last mile access, it 
is virtually guaranteed that such an alternative system will 
never develop. Restrict local access and you restrict 
innovation.
    Policy deliberations must also include an extensive 
discussion in how to apply current social obligations to IP-
enabled services that substitute for traditional voice. XO pays 
a contribution to the Universal Service Fund equal to 11 
percent of our interstate and international revenues. With some 
providers attempting to exploit the lack of clear policy on 
VoIP, we need to ensure that all telephone service providers 
contribute to the Universal Service Fund or something similar 
on the same basis without regard to arcane, regulatory 
classification.
    XO also supports obligations to ensure enhanced 911 
services are available and accessible at all times, regardless 
of the provider. Providers of IP-enabled services must also 
look at providing access for the disabled. In addition, given 
the current national security environment in which we find 
ourselves, CALEA obligations are vital for law enforcement and 
homeland security. Finally, a just intercarrier compensation 
scheme is necessary to ensure no one provider is either 
overburdened or riding free with these services. If the local 
exchange facilities are accessed, compensation should be due.
    It is important that any legislation that seeks to amend 
significant portions of the 1996 act protect the underlying 
provisions that brought competition to the marketplace and in 
turn led to the innovations that we see today.
    We look forward to working with the subcommittee on these 
issues, and I am happy to answer any questions.
    Thank you.
    [The prepared statement of Carl J. Grivner follows:]

  Prepared Statement of Carl J. Grivner, Chief Executive Officer, XO 
                          Communications, Inc.

    Chairman Upton, Ranking Member Markey, and Members of the 
Subcommittee; thank you for the opportunity to testify today regarding 
Internet Protocol Enabled Services and their affect on the voice 
marketplace. My name is Carl Grivner and I am CEO of XO Communications, 
one of the Nation's largest facilities-based providers of 
telecommunications and broadband services. Prior to joining XO as CEO 
in 2003, I served as Chief Operating Officer for Global Crossing and 
held various positions at telecommunications companies including 
Worldport, Cable & Wireless, and Ameritech.
    Originally formed as Nextlink in 1996, XO has expanded its 
telecommunications offerings from its original 4 small markets to 70 
metro area markets in 26 states today. 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 is not your average CLEC. In fact, we really 
don't view ourselves as such. XO's facilities and services have enabled 
us to develop into a National LEC. We are in the business of building 
the physical infrastructure this country needs in order to benefit from 
the extraordinary innovations that are transforming the way we 
communicate. XO has invested heavily in building its own facilities 
spending over $8 billion and constructing over 1.1 million miles of 
fiber. We have an extensive set of 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. In building our networks, we have overcome obstacles city block 
by city block and office building by office building. Where the 
networks of yesterday use copper, we have installed fiber. Where the 
networks of yesterday use circuit switches, we have installed soft 
switches, optical switches, and the most efficient multiplexing 
technology. Finally, where landline network facilities are too 
expensive, we have invested heavily in wireless. XO is North America's 
largest holder of fixed broadband wireless licenses, covering the 27 
GHz-32 GHz Local Multi-point Distribution Service, or LMDS spectrum.

                          IP ENABLED SERVICES

    IP Enabled Services are, indeed, changing the voice and data 
marketplace. The Internet's explosive growth in recent years has 
focused intensive efforts worldwide on developing IP-based networks and 
applications. According to the Federal Communications Commission (FCC), 
roughly 32.5 million broadband lines connected homes and businesses to 
the internet as of June 30, 2004.\1\
---------------------------------------------------------------------------
    \1\ See Federal Communications Commission Report on High-Speed 
Internet Access Services, December 2004.
---------------------------------------------------------------------------
    Over the past few years IP-based technologies have undergone rapid 
innovation. Many of these innovations have the effect of increasing the 
efficiency of the physical components of our network by increasing the 
effective capacity of networks for these types of applications. We 
believe that IP-based technologies will serve as the foundation of 
integrated networks that treat all transmissions--including voice, fax 
and video--simply as applications carried over an integrated 
transmission facility. Although not always the case, voice over IP, or 
VoIP, technology usually incorporates the quality of service necessary 
for commercial deployments and is increasingly price-competitive in 
terms of the equipment that is installed at the customer's premises. We 
expect that, over time, improved technology and the manufacture of 
sufficient volumes of equipment will make customer adoption of VoIP 
applications more prevalent.
    XO recognized the value of IP-based technologies early on. We have 
invested a significant amount in this area. In fact, IP-based 
technologies are the single strongest pillar for the future of our 
company. As I mentioned earlier, we have deployed a large number of 
newly-developed packet-based switching technologies, including soft 
switch, optical and Ethernet switching. The soft-switch is a 
distributed computer system that performs similar functions to a 
circuit switch, but more efficiently. It can route and switch 
information at an extremely fast rate. In 2000, we began deploying 
softswitch technologies from Sonus Networks. Today, we have one of the 
largest deployments of Sonus softswitches in the country. Our 
softswitches serve forty-four markets and deliver more than 600 million 
minutes of customer long distance traffic each month across our 
national IP network.
    Earlier this year, XO launched a new industry-leading bundled voice 
over Internet Protocol (VoIP) solution that will give business 
customers in Boston, New York City, Washington DC, and Baltimore 
enhanced features, functionality and value for their voice and Internet 
services. Full nationwide availability is expected by mid-April. This 
service, called XOptions Flex is an integrated voice and data service 
delivered to a customer over one converged facility, providing for one 
invoice from one proven supplier with one point of accountability. 
XOptions Flex will be available for a flat monthly price and include 
over twenty standard voice applications and features for each phone 
line and offer dedicated Internet access up to 3 Mbps. The service 
allows for what is called Dynamic Bandwidth Allocation which allows 
customers to maximize the utilization of a T1 circuit by allocating 
bandwidth to data applications while voice lines are idle; in this 
case, voice will always have priority. This is very different from TDM 
applications that require the user to fix the bandwidth either for 
voice, or for data. In addition, this service will allow customers to 
make real-time changes to their services configuration. We are truly 
empowering end users to design and use their own services in a manner 
that has never been possible before.
    Though overall pricing for VoIP offerings is comparable across the 
business market, we offer capabilities that other providers do not. 
First, we offer a true VoIP solution. Rather than simply providing IP 
based transport between traditional phones, or taking an IP signal only 
up to the switch, we enable our customers to experience true VoIP from 
origination to termination. Second, we provide these services over our 
own local networks and over our advanced internet backbone. This gives 
us the scalability needed to continue to increase future offerings 
without significant bandwidth constraints. Further investment in 
compression technologies will bolster that ability. Third, we are 
nationwide, enabling coast-to-coast communication for our business 
customers.
    From our perspective, this is only the beginning for VoIP and IP-
enabled services. XO plans to continue to broaden its IP-based product 
portfolio this year and next to bring the benefits VoIP has to offer to 
an even larger market. We will build upon XOptions Flex to deliver 
enhanced features to larger and distribution organizations. As 
mentioned earlier, we expect customer adoption of VoIP applications to 
continue; especially as the quality of services offered increase and 
the costs of providing these services decrease. In 2004, the number of 
US business using VoIP grew to 12 percent, a substantial increase from 
just 3 percent in 2003.\2\ We expect that to continue.
---------------------------------------------------------------------------
    \2\ See ``Business VoIP: An End-User's Perspective, 2004'' 
(December 7, 2004). In-Stat/MDR
---------------------------------------------------------------------------
                        VOIP REGULATORY POLICIES

    It is important to note that companies like XO cannot offer these 
innovative services without access to so-called ``last mile'' 
bottlenecks. This is not because we would rather piggyback our services 
over someone else's lines, on the contrary, we prefer to provide 
services over networks that we own and control. And we have 
demonstrated that preference consistently; given the billions of 
dollars we have invested in our own infrastructure make that abundantly 
clear.
    Unfortunately, the bandwidth requirements of most of our customers 
are moderate. We serve the long-neglected small and medium-sized 
businesses and the revenue opportunities associated with these types of 
customers are simply not large enough to justify construction of 
redundant loops. Moreover, building another connection to a customer 
building runs into a number of problems.
    First is cost. A 500 ft ``lateral'' connection from an XO fiber 
ring to a customer building can cost at least a quarter of a million 
dollars, and that is if everything goes perfectly.
    Second is time. It can take as long as 6 months to build another 
line to a customer building. Very few businesses are willing to wait 
that long for service.
    The Third problem is local restrictions. The building owner may 
refuse to allow another line to connect to the premises. In addition, 
various municipalities can place restrictions on when and how you can 
construct a building connection.
    In light of these inherent obstacles within the competitive 
industry, companies like XO are forced to lease many of these legacy 
``last mile'' loops. This issue of loop access brings me to the 
discussion of what the public policy objectives should be in addressing 
VoIP. In the context of examining our telecommunications laws, I have 
heard two reoccurring comments from Members of Congress: the desire to 
(1) encourage and bolster facilities-based competition; and (2) 
maintain some form of regulatory certainty.
    XO agrees both points. We took the intent of the 1996 Act to heart 
and built our own facilities to compete. We continue to invest and 
build and we are actively pursing alternatives to ``last mile'' access 
through our broadband wireless licenses. On the second point, 
regulatory certainty is desirable for all industry participants in 
order to bring additional investment and growth to the sector; however, 
it depends on exactly what you mean by regulatory certainty. We don't 
believe that regulatory certainty should mean eliminating current 
access requirements for incumbent telecommunications providers solely 
because IP based technologies are used. In fact, the same copper based 
T-1 lines that provide traditional voice are also used to provide VoIP 
services.
    It is imperative that these policy goals be pursued in light of the 
specific circumstances of the telecommunications industry. considers 
public policy toward VoIP and its goals of encouraging investment and 
reducing regulation, it is important to keep in mind that the 
``marketplace'' involves more than just residential telephone service. 
Most telecommunications discussions regarding regulation of IP-based 
services center around the looming ``battle of the titans'' between 
cable company facilities used for broadband and voice vs. telephone 
company DSL broadband and voice (as well as eventually video) in the 
residential market. In my opinion, this focus on the residential market 
is the primary driver behind the call for ``regulatory parity''.
    But, I must caution that policy makers keep in mind that two 
distinct types of markets exist in the telecommunications world: the 
residential market and the business markets. It is very difficult to 
apply broad regulatory principles based on one vision of the 
marketplace. It may or may not be wise to rely on the presence of cable 
companies in the residential market as an adequate constraint on ILEC 
market power. But cable companies cannot be relied upon to bring 
competition to the business markets, because, as the FCC recently 
concluded, cable companies generally do not compete in the business 
market. Thus, to accept a duopoly as an inevitable ``better than 
nothing'' version of competition in the residential market, without 
engaging in a separate view of the business markets, will ultimately 
doom healthy competition in the business market.
    XO Communications provides the perfect example of my point. We are 
a robust competitor investing billions of dollars in our network, 
creating jobs and consumer benefits in the process. XO focuses this 
investment on competing with the telephone companies in the business 
markets, not the residential market. In truth, the vast bulk of 
telecommunications usage and investment in this country is for business 
services. Individual consumer services are important, but it is the 
market for business telecommunications services that truly drives 
investment, growth, and innovation. Companies like XO are the key 
competitors in providing telecom services to businesses, especially the 
small and medium sized businesses that President Bush and most 
economists recognize to be the main sources of job creation and 
economic growth in America today.
    Everyone here recognizes that competition is the key to stable 
telecommunications policy. However, there are critical government 
policies that must be clearly stated and vigorously enforced if 
competition is to continue to flourish.
    Access to the so-called ``last mile'' must remain available for 
lease by competitors at reasonable rates and on reasonable terms. While 
XO strives to serve more customers entirely over its own network, the 
issues I mentioned previously (cost, build time, and local 
restrictions) make it economically prohibitive to build alternative 
``last mile'' solutions in most cases.
    I would like to make a point, however, that loop unbundling does 
not mean heavy-handed rate regulation. We are not a ``why buy the cow, 
when you can get the milk for free'' company. Do we believe that 
unbundled access should continue indefinitely? I don't believe that is 
prudent for the marketplace if it becomes feasible for competitors to 
build their own loops. However, as most of the Members of the 
Subcommittee know, the 1996 Act provided for a transition to 
facilities-based competition through Unbundled Network Elements (UNE) 
access. We're working tirelessly to get there, but until the industry 
can figure a way to develop a commercially viable and more efficient 
system than the legacy copper lines that currently connect virtually 
every residence and business, we will continue to need access to these 
last mile bottlenecks.
    This situation is not unique to the telecommunications industry. In 
the electricity industry, independent power producers must also access 
existing transmission facilities of incumbent providers in order to 
move their power to the consumer, and at just and reasonable rates.
    In addition, telecom policy must include an extensive discussion on 
how to apply current social obligations to IP enabled services that may 
substitute for traditional voice. Like other carriers, XO pays a 
contribution to the federal universal service fund equal to more than 
10% of its interstate and international end user revenues. We 
understand the importance of universal service to our society. Today, 
however, the universal service contribution requirement has created a 
substantial amount of ``regulatory arbitrage'' by providers of VoIP. 
Carriers attempting to gain a competitive advantage seek to exploit the 
lack of clear policy on the regulation of VoIP, which, in turn, leads 
to an irrational application of universal service fees to some and not 
to others. This situation should be remedied so that all telephone 
service providers contribute to the universal service fund on the same 
basis, without regard to arcane and irrational differences in their 
regulatory classification.
    XO also supports obligations to ensure E-911 services are available 
and accessible at all times, regardless of the provider. Providers of 
IP-enabled services must also look at providing access for the 
disabled. In addition, given the current national security environment 
in which we find ourselves, CALEA obligations are vital for law 
enforcement and homeland security. Finally, a just intercarrier 
compensation scheme is necessary to ensure no one provider is either 
overburdened or ``riding free'' when providing these services. If the 
facilities of a local carrier are accessed, compensation should be due.
    While the FCC has open proceedings and summits to work on 
addressing these issues, it is important that any legislation that 
seeks to amend significant portions of the 1996 Act consider all 
ramifications and provide sufficient guidance so that clarity, 
investment, competition, and innovation can continue in the 
telecommunications industry--bringing even more exciting and 
competitive products to the consumer. I know that bills have been 
introduced by Representative Pickering and Representatives Stearns and 
Boucher on this issue. I thank them for their leadership and 
willingness to highlight the exact issues that we must debate.
    Again, Mr. Chairman, I thank you for the opportunity to provide 
XO's views on IP Enabled Services and look forward to working with the 
Subcommittee on these important issues.

    Mr. Upton. At this point, we are going to adjourn. We are 
actually voting on the Markey amendment, so Mr. Markey needs to 
cast his vote early on the House floor. So we are going to stop 
at this point. We have a series of votes, and I think we should 
be prepared to come back with Mr. Melcher as early as--we will 
try for 11:45. It will not be before then, but we will try to 
come back at--between 11:45 and 12.
    Thank you.
    [Brief recess.]
    Mr. Upton. All my absent members promised that they were 
watching this on the TV in their office, I want you to know, 
but I think we will get started before the next wave of votes 
continues.
    And Mr. Melcher, we are prepared for your testimony. Thank 
you again for going along with us on our delay.
    And I would note that the Markey amendment won 
overwhelmingly, so he is a very happy guy.

                    STATEMENT OF JOHN MELCHER

    Mr. Melcher. Well, it is good to see you again, Mr. 
Chairman. Thanks for your time today, and my congratulations to 
Representative Markey.
    We also would like to extend our gratitude to 
Representative Shimkus on your committee and Representative 
Eshoo, as they co-chair the House side of the E-911 caucus that 
we helped to get started a few years ago. Thank you for your 
time.
    It is a pleasure to be in front of this committee, because 
this committee is the one that really gets it. You know, our 
issue is one of those that is not highly understood by the rank 
and file, and this committee is the one who really seems to get 
most of the detail. For those who do not know me, I am John 
Melcher. I am the Executive Director of the Greater Harris 
County 911 System, which serves metropolitan Houston. We are 
the second largest 911 system in the country. I also am a 
recent past-president of NENA, the National Emergency Number 
Association, and also representing my friends in the Texas 911 
Alliance.
    I brought with me, today, Mr. Chairman, Mr. Peter John and 
his daughter, Joyce, who were the subjects of a matter that has 
gained quite a bit of notoriety around the country, which was 
the home invasion that occurred in the southwest part of my 
jurisdiction in February. Mr. John and his wife were at home 
that afternoon downstairs. The daughter was upstairs.
    Mr. Upton. Could you just point out who they are?
    Mr. Melcher. Yes, right behind me.
    Mr. Upton. Thank you.
    Mr. Melcher. We are glad that they were able to take time 
to be here and--with us, and we are actually glad that Mr. John 
and Ms. John are actually here with us at all. February 2 some 
intruders invaded their home in an attempt to rob them, and 
actually shot Mrs. John while she screamed to her daughter, 
Joyce, who was upstairs. Joyce, who is 17 years old, grabbed 
the phone and did what everybody does when they are in need of 
emergency assistance. She dialed 911. She was greeted with a 
telephone recording that said, ``Stop. You can not dial 911 
from this phone.'' And the details are in my written testimony.
    It is a tragedy not only because of the lack of access to 
911, it is a tragedy that a 17-year-old has to go through such 
a horrific experience while her parents are being shot 
downstairs, but she thought it was the telephone instrument. 
She went to another instrument and tried it again. And only 
after the assailants fled was she able to leave the house and 
go to a neighbor's house and dial 911. We believe that the time 
span there was about 10 minutes. Now fortunately these people 
were not very good shooters and Mr. and Mrs. John have survived 
their injuries and are healing very nicely. And God has blessed 
them. But in the 10 minutes that we lost, had their injuries 
been more life threatening, the outcome could certainly have 
been different. But even more so, the assailants are still at 
large. That 10 minutes probably could have made the difference 
in capturing the assailants or not. And so I am pleased that 
they are able to be here with us today to put a face on the 
down side of what happens when we go too fast.
    You know, this is--I have appeared before your committee 
and others up here on the Hill several times, and I liken a lot 
of witnesses who testify before committees in two categories, 
begging or whining. We have never been in a position to do 
that, Mr. Chairman, and we are grateful to be able to come back 
to say that we are offering some hope, there is some light at 
the end of the tunnel, and we actually have some solutions for 
you.
    In my written testimony, I took the role of raconteur and 
divided some of this into the good, the bad, and the ugly.
    The good is that all of this technology that you have heard 
about today, and I won't go into it again, is great. It offers 
consumers more choices, more options, and gives assets to 
people who need them who couldn't get them before. The cost is 
bringing it down. So we have more people, more eyes and ears 
that have access to telephony and to communications devices. 
And those eyes and ears are reporting fires and crimes and 
emergencies and medical situations, so that emergency 
responders have better access to people who need help. But if 
we can't get them into 911, it is hard to help them. And if we 
can't find them, we can't help them.
    So that is what we are here about today.
    The bad is that as we look at all of these new technologies 
that are coming to bear, they are trying to plug into an 
antiquated and fragmented 911 system. And unfortunately, our 
system in this country today is Jurassic in nature. It is 
woefully lacking in the ability to adapt to new and emerging 
technologies. That is the bad part.
    The ugly fact is that the system is so fragmented I don't 
know that we will ever be able to achieve where we are going as 
technologies continue to emerge unless we address some 
standardization and some upgrade to our 911 infrastructure. But 
as the ugly is so bad, it can also be good, because the very 
technology that poses challenges to us in the 911 industry, 
should we be allowed to embrace it ourselves, it may actually 
be a solution in our future, both near-term and long-term, and 
I want to talk more about the light at the end of the tunnel.
    My fellow witnesses here today represent quite a good cross 
section. You have heard from ISPs in recent hearings as well as 
this one. You are hearing from incumbent local exchange 
carriers. They both have good arguments. They both have bad 
arguments. And they both talk out of both sides of their mouth, 
depending on who they are talking to. Some of them will go to 
the consumer and say, ``Let us be your new phone company,'' but 
they will come to you and say, ``We are not a phone company. 
You can't regulate us.'' But I think the majority of them are 
trying and doing a yeoman's job. Some are doing an excellent 
job, and we will tell you about some successes in Houston. 
Others are not doing such a good job and are somewhat 
disingenuous in the way that they approach this, and we hope 
that the committee will address that.
    As I see it, your job before you, as you looking at 
rewriting the Telecommunications Act, is to make sure that 911 
is a good, key component. And we applaud that effort, because 
911, as a forethought, not an afterthought, is going to help us 
in the future. As you know, when we went to wireless 
technology, and regarding that, we have been in front of you 
before, 911 was kind of an afterthought, and we spent a lot of 
time playing catch up.
    But today we have a momentum that is built. And thanks to 
the effort of this committee and to Chairman Barton and all of 
those who really did it, we now have in place the Enhanced 911 
Act. It has recently been signed into law. We obviously need to 
put a little more effort into that so that we get some good 
funding, which addresses the infrastructure that is so woefully 
inadequate that I described earlier, but it also lends some 
standardization capability and some national leadership 
capability in that joint program office. So getting that office 
up and running is very important and should be of the highest 
priority of your committee and this Congress. Getting some 
funding as far as grants are concerned to these E-911 systems 
up and doing what they are supposed to be doing is also a very, 
very high priority.
    I bring you success stories from Houston. We have in place 
technologies that address the capability of interconnecting 
today under the old regular, or what the techies are calling I2 
or Incumbent type situations. We have a method that we built 
for the automatic crash notification where we had police car 
crash data and voice that were able to get into our system and 
that is done.
    Mr. Upton. I might just ask you to summarize as you have--
--
    Mr. Melcher. Yes, sir.
    Mr. Upton. [continuing] exceeded your--I don't know if the 
clock down there is----
    Mr. Melcher. I didn't know if the timer was set for us or 
not, but I will summarize.
    The issue is not a technological issue. It is a 
participation and a policy issue. We would encourage you to 
encourage the FCC to do some interim rulemaking while you guys 
wrestle with the Telecommunications Act. And we certainly 
appreciate your attention to this matter, because again, 911 as 
a forethought is going to help all of us.
    Thank you, Mr. Chairman.
    [The prepared statement of John Melcher follows:]

Prepared Statement of John Melcher, Executive Director, Greater Harris 
                     County 9-1-1 Emergency Network

    Mr. Chairman and members of the Committee, thank you very much for 
providing me with this opportunity to appear before you today. My name 
is John Melcher, and I serve as the Executive Director of the Greater 
Harris County 9-1-1 Emergency Network where we administer the 9-1-1 
system serving approximately 4 million people in the Houston, Texas 
metropolitan area.

                        THE VOIP 9-1-1 INCIDENT

    Before we get started I would like to introduce a Houston family, 
the John family, to the committee members. Sitting behind me is Pastor 
Peter John, his wife Sosamma, and their daughter, Joyce. This family is 
quite fortunate to be here today, Mr. Chairman, as just a month ago 
both Pastor and Mrs. John were shot during a home invasion in their 
southwest Houston home.
    A quiet Thursday afternoon at the John residence in the Mission 
Bend subdivision was horrifically interrupted when the family 
confronted home invaders attempting to rob the family at gunpoint. 
Pastor John and his wife were shot during the commission of the felony. 
As he bled from his leg wound, the father exhorted his daughter to call 
9-1-1 to summon an ambulance for him and his injured wife. The daughter 
ran and grabbed the cordless phone, dialed 9-1-1, and received this 
recording: ``Stop, you must dial 9-1-1 from another telephone. 9-1-1 is 
not available from this telephone line. No emergency personnel will be 
dispatched.''
    Joyce, thinking the problem was with the cordless phone, tried 
another telephone instrument in the house and got the same recording. 
After the assailants fled, frantic and desperate, she ran to a neighbor 
and dialed 9-1-1. Fortunately, her neighbor's service had access to 
traditional 9-1-1 features and Public Safety Answering Point call 
takers who immediately arranged an ambulance dispatch for Joyce's 
wounded parents. Needless to say this was an extremely traumatic 
incident that was exacerbated by a lack of access to emergency 9-1-1 
services.
    This family's experience typifies the American consumer's 
relationship with new and innovative IP-enabled services and the 
dramatic impact these services have on public safety. Call it what you 
may, grace of God, good fortune, or Karma, the John family experience 
with Voice Over Internet Protocol (VoIP) broadband telephone service is 
a compelling yet harrowing story about the benefits of IP-enabled 
services while highlighting the need to formulate a forward plan for 
the future of emergency services in this country.
    I am a bit of a raconteur. I call the anecdote I relate to you 
today ``IP-Enabled Services-VoIP. The Good, the Bad, and the Ugly.'' 
This story brings home the benefits of VoIP that draw consumers and 
will continue to do so, exponentially. That is the good. The story I 
relate today to this committee will also describe the increasing strain 
on an already stretched and aging 9-1-1 infrastructure. This I will 
call the bad. Finally, I lay out as fodder for future discussion the 
support you can give public safety for us to realize the benefits of 
IP-enabled services and enable PSAPs across the nation to deliver a 
more effective and efficient response for emergency calls that are 
delivered to PSAPs with enhanced information to the call taker. While 
this part of my story could be called the ugly, in reality it brings 
the storytelling full circle. This is because when 9-1-1 can fully 
realize the benefits of IP-enabled services that ordinary consumers are 
seeing today, then the ugly becomes the good for both Public Safety and 
the citizens of the United States.

                                THE GOOD

    IP-enabled services VoIP services are dramatically changing the 
types of communications services offered to American consumers. The 
pace of technological innovation in the IP-enabled arena is 
unparalleled to any other time in modern communication industry. I have 
been involved in communications for over twenty-five years. Over 15 
years have been in my role of a 9-1-1 system administrator. I would say 
that the revolution of IP-enabled services has a much greater impact on 
consumers than the divestiture of Bell System or the Telecommunications 
Act of 1996. Granted, both of the aforementioned watersheds in the 
annals of telecommunications history have helped usher in the IP 
revolution but the convergence of both voice and data in a unified 
architecture and protocol has a more direct impact on consumers.
    These new VoIP services are lower in cost, offer more flexible 
features, and offer unlimited calling plans. These services are touted 
as superior substitutes to the regular circuit switched Plain Old 
Telephone Service lines (POTS) they are supplanting. The VoIP services 
are lower in cost for a myriad of reasons. First, VoIP services offered 
today do not carry the fee structure associated with regulated 
telecommunications services. Second, VoIP is unique in that the IP 
application, in this case VoIP, can be physically separated from the 
transmission medium, i.e. the copper twisted pair, fiber, or coaxial 
cable, that carries the IP packets to the consumer. Unlike traditional 
telephony, the IP-enabled service provider can choose to vend their 
services with or without the underlying transmission facility. This 
definitely can impact the price points associated with communications 
services. Lastly, some VoIP applications, both at the residential and 
enterprise levels, require fewer personnel to install and maintain and 
thereby can lead to reduced monthly recurring charges.
    VoIP is also innovative in the flexibility it affords consumers. 
Traditional telephony necessitates that consumers contact their service 
provider to request the service provider activate features such as call 
forwarding, answering options, and personalized rings. New VoIP 
applications allow consumers to ``design'' their service. Follow me 
roaming, call screening, and personalized ringing can all be programmed 
by consumers via Internet access to their account. As more features of 
communications are pushed out to the end of the network and come under 
the direct control of the end user the services provided are more 
flexible and dynamic. While this empowers consumers in the 
communications market it also has an unintended consequence of making 
access to 9-1-1 services problematic. I shall discuss this in more 
detail shortly.
    VoIP is the harbinger for the ultimate product for consumers in 
communications services: geographic number portability. VoIP combines 
low cost with flexibility by allowing a New York based talent firm to 
have Los Angeles area code numbers (flexibility) without the exorbitant 
costs associated with foreign exchange mileage and usage charges. The 
benefits for parents with children attending far away universities, 
elderly parents on limited incomes, and other similar consumer 
scenarios are easily envisioned.
    The Johns opted for their Internet based VoIP because of the 
unlimited calling plan. VoIP services are generally marketed as a 
comparable substitute for traditional circuit switched local and long 
distance services. For families and small businesses that use long 
distance to keep in touch with family members or business contacts, 
this new technology is a very attractive enticement to supplant 
existing POTS services.
    The future of IP-enabled services is even brighter as 3rd 
Generation(3G) wireless networks are deployed. Wireless broadband 
coupled with IP technology is poised to launch a new generation of IP 
devices that will allow mobile consumers a wider array of communication 
and information services. The future of communication--voice, data, 
text, video, etc.--is exciting and it is just around the corner.
    Divestiture, competition, and deregulation of telecommunications 
have provided the required impetus of investment to bring a host of new 
and exciting communications services to consumers. This bodes well for 
the future public safety and emergency dispatch services. As the 
recently liberated Martha would say, ``That is a good thing.''

                                THE BAD

    It is no secret today's 9-1-1 infrastructure is rooted in an era 
where communications service consisted of fixed-location, POTS lines 
installed by a monopoly telecommunications provider. This monopoly 
provider was expected to provide cheap and reliable 9-1-1 systems as a 
``social obligation'' associated with being given monopoly rights. It 
was a symbiotic relationship for both the telephone company and the 
local 9-1-1 administrators. The telephone company benefited because 
their subscribers had easy access to emergency services. The 9-1-1 
administrators could offer reliable emergency services while assessing 
small 9-1-1 service fees on subscriber phone bills.
    The communications landscape has changed dramatically since Texas' 
first enhanced 9-1-1 system was activated in Houston, Texas in January 
of 1986. Approximately 40% of our total 9-1-1 call volume is from 
wireless phones. The telecommunications providers in our area have 
mushroomed from 6 franchise telephone companies to over 200 competitive 
local exchange providers offering telecommunications as either pure 
resellers, facilities-based carriers using Unbundled Network Element 
(UNE) platforms, 3rd party facilities, their own facilities, or a 
combination of any of the aforementioned.
    Our 9-1-1 system has changed little during this same period. We 
have pioneered competition in the 9-1-1 database management arena so as 
to have a neutral 3rd party assess the accuracy and timeliness of the 
Local Exchange Carrier (LEC) data being submitted into the 9-1-1 
system. Our 9-1-1 network components are still provided to us by the 
incumbent LEC, SBC, in an uneasy but working relationship with Intrado, 
our designated 9-1-1 database management services provider. I say 
uneasy because the splitting of 9-1-1 network management from 9-1-1 
database management, two processes that are functionally ``joined at 
the hip,'' is unheard of outside of Texas. The ILEC providing 9-1-1 
services generally provides both of these key 9-1-1 service components.
    Given the consumer controlled aspect of new IP-enabled VoIP 
services, especially those VoIP services that are Internet based, 
today's 9-1-1 infrastructure, while long on reliability, comes up short 
on its ability to accommodate these new technologies. Members of this 
committee, along with the FCC, have had a glimpse of what I am 
implying. Representative Shimkus, a strong and ardent supporter of E9-
1-1 services, was instrumental in passing the recent ENHANCE 9-1-1 Act 
in the waning days of the last Congressional session. This legislation, 
when funded, will help facilitate the deployment of wireless 9-1-1 and 
in general improve the 9-1-1 infrastructure.
    The lesson we learned with wireless was that the 9-1-1 system is 
extremely limited in its ability to handle mobile communication 
technologies. Consequently, the call routing logic was pushed back into 
the wireless carrier network. Wireless carriers use either a Mobile 
Positioning Center (MPC) or translation tables in the switch memory of 
the Mobile Switching Center (MSC) to maintain routing tables that 
associate cell tower with a PSAP for the routing of wireless calls. 
These tables are used to assign a pseudo Automatic Number 
Identification (p-ANI) that will correspond to a static record in the 
ILEC 9-1-1 system.
    Some types of VoIP, especially applications relying on the Internet 
and existing broadband connections, share much in common with wireless 
9-1-1. There is one distinct and major difference, however. Unlike 
wireless Phase II where the wireless service provider is responsible 
for accurately assessing the location of the user within FCC defined 
requirements for location services, the Internet based VoIP services 
location is determined entirely by the end user. This precludes 
automatic submission of user location data to the 9-1-1 system.
    This is problematic for both consumers and public safety. Consumers 
have a reasonable and realistic expectation that access to 9-1-1 
services is available on any communications service that is being 
touted as a replacement for POTS services. Public safety educators have 
done a yeoman's job in educating the American public about the benefits 
of 9-1-1 service. Ask any child over the age of 4 who should they call 
if Mommy can't wake up and the majority of them will tell you 9-1-1. 
Hardly a week goes by without some televised action show that has a 
dramatic scene where someone yells, ``Call 9-1-1.'' Furthermore, the 
public expects that access to 9-1-1 services is not only ubiquitous it 
is also automatic. That is, the consumer need do nothing more than 
request communications services. Providing location of service usage is 
an alien and foreign concept to many consumers.
    PSAPs personnel, while trained to handle emergency calls 
irrespective of how they come into the PSAP with or without the 
attendant data, have come to rely on the public's knowledge of 9-1-1 to 
pattern operational practices to optimize their response to emergency 
incidents. VoIP's inability to access the 9-1-1 system elements and the 
delivery of emergency calls to local telephone lines compels PSAP 
personnel to reassess existing PSAP call-handling procedures, in ways 
currently unknown both to the PSAP and to the VoIP provider. PSAP 
personnel need to know a relatively uniform call processing function 
for VoIP calls so as to properly train call takers. VoIP providers need 
to appreciate the call taking and dispatch function in PSAPs so as to 
provide the optimal information required by PSAPs for emergency calls 
placed by VoIP subscribers. This process takes time. In our business 
time equals money and may also equal lives.
    This change of roles for the consumer as well as the PSAP personnel 
require 9-1-1 system administrators take on an extensive educational 
campaign to educate both the public and our PSAPs about the 
shortcomings of VoIP interfacing with the 9-1-1 system. This 
educational process may address immediate needs but may have the 
unintended consequence of diminishing the relevance of 9-1-1 in the 
public's eye. We are leery of any campaign that says ``9-1-1 is the 
number for emergencies except if you use VoIP.'' Given the projected 
exponential growth of VoIP and other IP-enabled communications services 
coupled with the limited innovation in today's 9-1-1 services market, I 
can tell you this dilemma certainly represents the Bad in the IP-
enabled Voice Market.

                                THE UGLY

    I pose this question to the members of the committee, ``Do you 
believe that ubiquitous access to 9-1-1 emergency services, 
irrespective of communication technology platform, is the only 
acceptable goal for 9-1-1 public policy?'' If your answer to that 
question is ``Yes'' then you must accept as axiomatic the fact the 
existing 9-1-1 infrastructure must be completely overhauled so as to 
accept new and innovative technology platforms supporting IP-enabled 
services. The ramification of such a public policy position is a double 
edge sword. Imagining the benefits of a new IP based 9-1-1 system with 
enhanced data elements and bringing that reality to consumers is a goal 
that would fit quite nicely in any political platform. However, the 
reality of supporting two households, the existing log cabin and 
building the manor house, can be politically unpalatable during times 
of severe budget constraints.
    The idea of a new and improved 9-1-1 systems based on packet 
technologies have been touted by outgoing FCC Chairman Michael Powell. 
Commission Copps recently iterated some of the same benefits of an IP-
based 9-1-1 system when he spoke to NENA last month in Washington D.C. 
The FCC and many VoIP Providers are visionary in seeing an enhanced 9-
1-1 infrastructure that not only includes ANI and ALI but also patient 
specific information such as medical records or language preference. 
This is all quite doable with the convergence of voice and data using 
IP on a unified platform.
    I need to note that a major catalyst that brought about the first 
generation of 9-1-1 services is no longer in existence. The absence of 
this catalyst can be directly attributable to the same factors that 
have ushered in this communication revolution: namely the divestiture 
of the Bell system and the Telecom Act of 1996. The first generation of 
9-1-1 systems, basic, and the second generation represented by enhanced 
features were both brought about through AT&T. AT&T developed the basic 
9-1-1 technology and upgraded the platform for the enhanced features of 
ANI, ALI, and Selective Routing. Many of the country's enhanced 9-1-1 
systems were installed after divestiture but nevertheless they have 
their roots in the old AT&T monopoly structure.
    There is no nationally prominent catalyst such as AT&T that can 
serve to design, test, and deploy a third generation 9-1-1 platform 
throughout the United States. It is also very important to understand 
the dual role of the ILEC in the roll out of the first and second 
generation of 9-1-1 platforms. These platforms were rolled out prior to 
the Telecom Act of 1996 and the introduction of competition to the 
local exchange market. Then, it really didn't matter that the 9-1-1 
service provider was also the only phone company in town. Now it does 
matter greatly. Remember that local regulators expected the ILEC to 
offer 9-1-1 at substantially reduced rates as return favor for enjoying 
monopoly presence in the local exchange market place. Therefore, 9-1-1 
was never and is still not a profit center for the existing 9-1-1 
service providers who for the most part are still the ILECs.
    The competitive local exchange market also offers no incentive for 
the ILEC to upgrade the 9-1-1 infrastructure. Upgrades will only 
facilitate the interconnection of competing service providers. 
Currently the traditional interconnection to 9-1-1 system elements is 
under public utility commission approved interconnection agreements 
between certified local exchange carriers and incumbent local exchange 
carriers. Denying access of these 9-1-1 system elements to non-
certified IP enabled providers serves only to create a natural barrier 
to competition for the ILEC. Simply put, why should the ILEC 
voluntarily allow competitors access to 9-1-1 systems and thereby 
further erode their existing customer base?
    Lack of access to 9-1-1 system elements compels VoIP providers to 
seek other methods to deliver calls to PSAPs. These other methods 
likely do not get answered with the same priority or have the same 
information that is generally associated with traditional 9-1-1 call 
delivery. This has the effect of creating a caste system for emergency 
services.
    Straddling the gap between generations can be a delicate balancing 
act for PSAPs, IP-enabled service providers, regulators, and 
legislators. There are costs associated with the support of two 
platforms for the duration of migration. These costs will be borne by 
all stakeholders. The existing 9-1-1 system is rooted in a 
geographically localized, dedicated trunk, and circuit switch platform 
paradigm. The cost to replicate this model nationwide for many IP-
enabled service providers is just not economically sustainable. Many of 
these entrepreneurial IP-enabled providers have very narrow profit 
margins. It is probably wiser to focus these limited assets on building 
a new generation 9-1-1 platform and attempt to keep the costs 
associated with current generation interconnection at a minimum. This 
requires a realistic assessment of performance expectations of VoIP 
providers in the current architecture while avoiding ``functional 
fixedness'' when looking at ways to interconnect to today's 9-1-1 
system elements. Functional fixedness is a term used in the practice of 
psychology which can best be described as follows:
    People are often very limited in the ways they think about objects, 
concepts, and people. When something is thought of only in terms of its 
functionality, then the person is demonstrating functional fixedness. 
This type of thinking is narrow and limited, often inhibiting the 
problem solving process.

                               NEXT STEPS

    The immediate need of 9-1-1 system administrators is to rip away 
the veils. Some VoIP providers wear the veil of ``lack of 9-1-1 system 
element access'' to cover their reluctance to spend money on 9-1-1 
interconnection. Compelling the ILECs to open up access to 9-1-1 system 
elements irrespective of certification status will certainly go a long 
way in removing this veil. Also, ILECs need to be compelled to allow 
new and innovative ways of allowing interconnection while not 
compromising system integrity. Some alternative examples of access 
would be implementing operational procedures to allow existing CLECs to 
serve as aggregators of emergency services instead of requiring each 
service provider to establish their own interconnection. This 
aggregation service is currently being offered by firms like Level 3 
Communications but may require altering existing interconnection 
agreements.
    Another solution is leveraging the Public Switched Telephone 
Network (PSTN) with proven technology. Greater Harris County 9-1-1 is 
using the PSTN to deliver emergency calls from telematics call centers 
to PSAPs via the existing 9-1-1 network, replete with ANI and ALI. I 
believe this same technology is being used for deliver of VoIP calls in 
Washington State and Rhode Island.
    ILECs can also offer an aggregation service of their own by 
strategically placing IP gateways with existing 9-1-1 routers. All of 
these examples serve as viable alternatives to costly direct trunking. 
Local regulatory bodies could execute a national policy similar to 
local state public regulatory commissions executing the federal 
Telecommunications Act of 1996. This would make these alternatives 
available to new IP-enabled technologies needing to deliver 9-1-1 calls 
to PSAPs. Ripping away this veil of lack of access will squarely put 
the onus of making 9-1-1 services available a service provider 
decision.
    Local regulatory bodies executing a national 9-1-1 policy can also 
assist 9-1-1 administrators in ripping away the ``quality of service 
and network integrity veil'' (ie, subterfuge or smoke screen) worn by 
the ILECs. As I mentioned earlier in my testimony there is currently 
nothing that would entice or compel the ILECs to open up access to 9-1-
1 system elements that would facilitate the interconnection of 
competitors. Many ILECs do not allow non-certified IP-enabled service 
providers traditional access to 9-1-1 system elements because they fear 
for the integrity of the 9-1-1 network. It appears Bell South does not 
want to entertain alternative interconnection methods such as the PSTN 
solution being used in Greater Harris County 9-1-1 for telematics 
merely because it isn't the traditional method of doing 9-1-1. 
Certification as a CLEC is no guarantee of sterling network integrity. 
The record books are full of examples of failed services by 
certificated local exchange carriers. Greater Harris County 9-1-1 had 
an incident where an end office was isolated from the 9-1-1 system 
because redundant circuits terminated in the same failed channel bank 
located in the LEC end office. Conversely, lack of certification does 
not automatically mean substandard network interconnection. In a 
competitive market place quality of service is a key product 
differentiator whether that service is provided by a certified CLEC or 
a non-certified IP-enabled service provider.
    And functional fixedness should not drive the spending of resources 
to interconnect to the existing 9-1-1 system. If there is a proven and 
tested method that is cheaper than the traditional direct trunk 
architecture, then the ILECs providing 9-1-1 elements should be open to 
alternative interconnection methods. The veil of ``network integrity'' 
must be stripped away to obliterate the caste system that is being 
formed today.
    The support for the third generation of IP-based 9-1-1 systems is 
more complex. Many stakeholders are simultaneously driving toward that 
destination via a variety of industry fora. The National Emergency 
Number Association, the Emergency Services Interconncetion Forum, the 
Internet Engineering Task Force , and Network Reliability and 
Interoperability Council are four key players all currently looking at 
next generation 9-1-1 platforms. In summary I see the following as key 
ingredients for successful design and deployment of a 3rd generation 
nationwide 9-1-1 IP based platform:

 Regulation and legislation conducive to industry development and 
        testing of a new IP-based platform
 Realization by regulators and legislators that 9-1-1 is a ``second 
        best'' market (as described by economists Richard Lipsey and 
        Kelvin Lancaster in 1956) rife with social obligations and 
        requiring oversight instead of laissez-faire competition market 
        management
 National catalyst to serve in the capacity AT&T did for 1st and 2nd 
        generation platforms-perhaps the newly authorized joint program 
        office?
 A business model that will assure industry participants of a 
        reasonable rate of return on investment in a 3rd generation 
        network
 Realization that there needs to be a viable business case in support 
        of 9-1-1

                             FINAL THOUGHTS

    I have covered a lot of ground in a short period. So in closing 
please allow me to offer you what I see as the current state of 
affairs. I speak from over 25 years in public safety and 9-1-1 
administration. We are truly at a crossroads for 9-1-1. IP-enabled 
services, in particular VoIP, present us with both an unprecedented 
challenge to 9-1-1 as well as an unprecedented opportunity for the 
advancement of emergency services. To put it a bit more 
philosophically, VoIP is the yin and yang of 9-1-1.
    We can continue down the bumpy and twisted road we traveled with 
wireless 9-1-1 or we can learn from our past experiences. This means we 
accept the fact that the problem is not with new technology but with 
the existing 9-1-1 infrastructure. We can quickly alter our learned 
behaviors and paradigms to accommodate these new VoIP services to our 
existing infrastructure and rip out the roots a burgeoning caste system 
of access to 9-1-1. I enlist your support in helping both VoIP 
providers and 9-1-1 service providers understand this concept. 9-1-1 
system administrators will work to educate our citizens about the 9-1-1 
services available to them via their communications providers.
    But this stop gap solution is short term. Unless we wish to face a 
similar dilemma with the next new mobile technology just beyond the 
horizon we must work to develop and deploy a new nationwide 9-1-1 
infrastructure capable of interfacing to numerous communication 
platforms. This migration must occur within in the next 60 months or 
this country puts at risk the social objective of 9-1-1 anywhere, any 
time, for any device. This committee has the resources and influence to 
help us attain this ambitious goal and we in the Public Safety industry 
encourage your active support.
    I thank you again for lending me your ears and giving me your time 
to discuss a matter I feel so passionately about. Your attention is 
most gratefully appreciated. Good day.

    Mr. Upton. Thank you. Again, thank you.
    Ms. Puckett.

                   STATEMENT OF KAREN PUCKETT

    Ms. Puckett. Mr. Chairman and members of the committee, my 
name is Karen Puckett. I am the President and Chief Operating 
Officer of CenturyTel. We provide telecommunications to 22 
States, 16 of the 22 States are represented in the Commerce 
Committee.
    You know, we are pretty excited about the future of new 
application technologies, such as VoIP, and we are adapting and 
evolving our business model. In the written testimony that I 
provided, you will see a map of a large fiber IP transport 
network that runs through middle America that we own and 
operate, and we are using this network transport for voice and 
data traffic for wireless, wireline, long distance, and IP 
providers today.
    But the concern is there is a level of misunderstanding 
related to IP technology. In fact, there is a confusion around 
the new application technology and the network technology that 
enables these applications to be delivered. So I brought with 
me a diagram over here to my left that illustrates the 
relationships and the dependency of the core network to the 
underlying enabler of these emerging applications.
    You know, Internet Protocol is blowing the voice and data 
market wide open, allowing everyone from large cable companies 
to Internet startups, like Pulver.com and Vonage to sell 
applications to businesses or residential consumers. This is 
assuming that companies like CenturyTel or the local cable 
company provide the network investment that enables these VoIP 
applications.
    Building and expanding our country's telecommunications 
infrastructure should be a priority to all telecommunication 
providers, and I am especially proud of CenturyTel's leadership 
in bringing telecommunications and economic development to 
rural America. We average only 14 access lines per square mile, 
but despite this low density, we have enabled over 70 percent 
of our customers with broadband services, and we are focused on 
providing and expanding broadband capability as we deliver 
voice data and applications, which really leads me to the key 
point.
    Advanced communication networks like ours are the 
foundation for realizing the promise of IP-enabled services in 
all markets. The network is the engine that makes IP services 
possible.
    IP technology has also changed the marketplace. The new 
reality is intense competition that is forcing a fundamental 
shift in our industry. This includes proposed mergers, the new 
services, more choices, and much more price points and lower 
price points. The industry is and has adapted to the changing 
marketplace. Now the Nation's communication policy must adapt 
as well.
    With all of this new opportunity, however, there are some 
issues that are emerging that are very concerning. Payment 
avoidance for use of the network is a growing problem. You 
know, if you walk out of a restaurant after you enjoy a meal 
without paying, it is theft. If too many people walk out 
without paying, the restaurant will shut down, and the 
community's economy will suffer. The same is true for rural 
telecommunications. Phantom traffic and other payment avoidance 
schemes are the same thing. We need Congress to be clear that 
this is no free lunch.
    Let us talk a moment about consumers.
    Some in this city will tell you now that we have things 
like Internet phone service we can forget about USF. They don't 
understand that IP services still run on the core underlying 
network, networks that reach into every community. Without the 
underlying networks, there is no Internet, there is no e-mail, 
there is no dial tone, there is no real-time communication to 
the rest of the world.
    So specifically, we need Congress to support stability and 
universal service by broadening the base of support and set 
higher standards for all of the recipients of USF. And from a 
business perspective, it is really clear the walls have come 
down between cable, wireline, wireless, satellite, and Internet 
based companies, yet these companies are treated in distinct 
different ways from a regulatory perspective. We have some with 
little to no regulatory oversight while others, like ourselves, 
are heavily regulated. Like services should be regulated the 
same way, and all should be held to the same service standards.
    Mr. Chairman, thank you for holding this hearing. Voice-
over IP is just one example of a really fascinating future. We 
believe there are even better things to come. I understand that 
this subcommittee will soon be exploring IP video. Just as the 
voice marketplace is being transformed by VoIP, local phone 
companies are eager to enter the competitive digital television 
market.
    I appreciate the opportunity.
    [The prepared statement of Karen Puckett follows:]

  Prepared Statement of Karen Puckett, President and Chief Operating 
                      Officer of CenturyTel, Inc.

    Mr. Chairman, members of the subcommittee, my name is Karen 
Puckett, and I am President Chief Operating Officer for CenturyTel. I 
appreciate the opportunity to appear before you today thank you for 
this opportunity to appear before you to address the critical subject 
of updating the nation's telecom laws and regulations to keep pace with 
the dramatic changes we see all around us today in the new 
communications marketplace. I will briefly highlight these technology 
advances; describe CenturyTel's aggressive approach to technology 
deployment and key role in making new service available; describe the 
challenge technology also presents to public policy; and suggest 
specific areas where national action is important and where your 
leadership is critical.

   I. VOIP IS AN APPLICATION THAT DEPENDS ON A BROADBAND CONNECTION 
                    ENABLED BY AN UNDERLYING NETWORK

    Action must be based on solid understanding of the technology and 
the market. The level of misunderstanding related to IP technology is a 
concern to those of us who work with cutting edge technology every day, 
and even more so to those who invest billions in our networks. In 
particular, there is confusion between new application technology such 
as VoIP that is deployed on top of networks, and the network technology 
that enables these applications, such as high capacity transport, fiber 
loops, DSL, or sophisticated switches and network management systems.
    VoIP is an example of even better things to come, as our industry 
increasingly integrates with the computer hardware, software, and 
entertainment sectors. Internet Protocol is blowing the voice market 
wide open, allowing everyone from major cable companies to Internet 
upstarts like Pulver and Vonage to serve a business or residential 
customer. Assuming, that is, that a provider such as CenturyTel or the 
local cable company has made the network investment required to enable 
a broadband connection.

   II. CENTURYTEL AND COMPANIES LIKE IT ARE BUILDING RURAL AMERICA'S 
                           BROADBAND NETWORK

    I am especially proud of Century Tel's leadership in bringing 
technology and economic development to rural America. We serve 2.3 
million customers in 22 states. We are the eighth largest local phone 
company in the United States. Seventy-five percent of our customers are 
residential. We only average 14 access lines per square mile. 
Nonetheless, over seventy percent of our customers have access to 
CenturyTel DSL.
    CenturyTel is adapting and evolving our business model to meet the 
evolving needs of our customers. Our 7,000 employees are very focused 
on further expanding our broadband capability as well as delivering the 
video and data applications of the future.
    This leads me to our key point: Advanced communications networks 
like ours are the foundation for realizing the promise of IP-enabled 
services. Without investments by companies like CenturyTel, Citizens, 
Consolidated, FairPoint, Iowa Tel, Valor, and many others, there would 
be no VoIP. There would be no broadband connection. There would be no 
switched digital video. There would be no platform over which to 
deliver the new services that have yet to emerge.

III. IP TECHNOLOGY IS ONE OF THE CATALYSTS OF THE CHANGING MARKETPLACE. 
                      POLICY MUST RACE TO KEEP UP.

    Without question, the further integration of IP-enabled services as 
a telecommunications alternative offers both challenges and 
opportunities for local telecommunications companies to adapt to a new 
world of rapid-paced innovation and intense competition from a wide 
variety of players. Equally true, this new reality is forcing 
fundamental shifts in our industry--from proposed mergers to the new 
services and choices our companies are rolling out. We recognize this 
at CenturyTel. For example, we are now leveraging our broadband network 
to trial and aggressively pursue an IPTV product offering. Finally, 
nine years after the Telecommunications Act's passage, we are seeing 
the real competition--facilities-based competition--that will be 
positive for consumers and for the U.S. economy. We are adapting with 
the marketplace, with technology, and with evolving consumer demands. 
Now, the nation's communications policy must adapt as well.
    Consumers and our economy urgently need a modern telecom policy 
that reflects today's realities and charts a constructive role for U.S. 
policy: safeguarding ongoing priorities such as universal service and 
law enforcement needs; and, encouraging all companies in today's 
marketplace to continue making the investment necessary to develop and 
deploy innovative new choices, beyond just VoIP.
    Since we have barely scratched the surface of broadband's potential 
to produce a whole new generation of innovative applications, I 
appreciate knowing that this Committee has proposed to write policies 
that broadly encourage network investment and product innovation far 
beyond first-generation VOIP.

         IV. KEY POLICY DECISIONS FACE CONGRESS AND REGULATORS

A. Affirm that those using the network must pay for their use.
    There is no free lunch, and there is no free network.
    Payment avoidance is a growing problem. If you walk out of the 
grocery store without paying, it's theft. If too many people walk out 
without paying, the grocery store will shut down, and the community 
will wither. The same is true of rural telecommunications. ``Phantom 
traffic'' and other payment avoidance schemes are the same thing.
    What can Congress do?

 Use its oversight authority to make clear that services used, 
        including the network, must be paid for, and that theft of 
        telecommunications services is theft plain and simple.
    Intercarrier compensation refers to the system of payments that 
support the network all carriers--ILECs, IXCs, IP carriers--use to 
originate and/or terminate their traffic. Without that network, no one 
would be in business. By far the most dangerous change proposed is 
``bill and keep,'' in which no payments are actually made. This would 
not be a constructive change. It would end, not mend the system, give a 
free ride to some companies, and ignore basic laws of economics.
    What can Congress do?

 Clarify that companies should pay the cost of using one another's 
        networks, and direct the FCC to render a decision consistent 
        with this principle, and do so within six months.
    We currently are awaiting the FCC's decision concerning Level 3's 
petition to be exempted from certain intercarrier payments. This will 
determine if VoIP providers whose calls depend on local communications 
networks must pay for their use of these networks--as their competitors 
are required to do.
    That is a question with far-reaching implications. I thank the 
members of this Committee who have spoken out on this important 
proceeding and made clear the importance of maintaining strong, viable 
networks across the nation--and requiring all who use these networks to 
help pay for their upkeep and continued evolution.

B. Address social and public safety concerns.
    Members of Congress have made it crystal clear that ubiquitous 911 
and E911 is a critical national priority. Recent news articles 
demonstrate that customers either take it for granted that they have 
E911, or assume that they'll never need it. When they discover it's not 
available, or find out they really do need it, it's too late. The 
results have been tragic. Finger pointing does not solve the problem. 
Congress can simply make clear that public safety responsibilities 
apply to all, and must be fulfilled.

C. Support the 21st century network through maintaining the Nation's 
        commitment to Universal Service.
    Some will tell you, ``Now that we have things like Internet phone 
service we can forget about universal service.'' They either ignore or 
don't understand that IP services still run on networks, networks that 
reach into every community. Without these networks, there is no 
Internet, no email, no dial tone, and no real-time, two-way connection 
to the broader world. Fortunately for America, you ``get it.''
    Universal service helps make sure these networks are viable in 
rural areas, and are continuously upgraded. It does so by helping 
ensure affordable access to a dial tone, and Internet access in our 
schools, libraries and rural health-care facilities. These remain 
important public policy goals. If anything, universal service is more 
important today than at any point in our nation's history, as we 
transition from an industrial to an information economy. Technology-
neutral universal service would require every competitor to contribute 
their fair share to support this promise to rural America.
    I firmly believe that universal service remains a critical priority 
for the nation, especially for the people served by companies like 
CenturyTel that are committed to rural America. We can all be excited 
about advances such as IP, but we as a nation must not forget those 
people who need help just to have basic access to the security of a 
dial tone.
    What can Congress do?

 Support stability in universal service by broadening the base of 
        support and setting high standards in order to receive 
        universal service.
 Consider explicitly supporting broadband deployment.

D. Reform retail Regulation
    Silo-driven policy making clouds the view of what is best for the 
customer. While much retail regulation occurs at the state level, 
Congress is responsible for the framework in which both FCC and state 
regulation occurs. For example, Congress preempted state regulation of 
wireless rates, and in 1997 preempted state and local barriers to 
entry.
    The walls have come down between cable, landline, wireless, 
satellite and Internet-based companies. Yet these companies are treated 
in distinctly different ways based not on the services they provide, 
but the technology they use. This is not a recipe for renewing 
America's information leadership, nor is it a recipe for speeding 
advanced services into our communities.
    How can my rates be regulated when someone else can use my network 
to provide an inferior product unregulated? Similar services should be 
regulated similarly, and all should be held to a similar standard.
    The solution, of course, is not to impose today's regulatory regime 
onto innovations. The thoughtful approach is to take up the bigger 
challenge which this Committee is undertaking: to explore the choices 
available in today's marketplace, to understand just how fundamentally 
the world of communications has changed, and to update our nation's 
telecom laws to keep pace with these changes. We must get government 
out of the business of determining which technologies and services are 
best, and hand that power and that choice to consumers. This is the 
united vision of the U.S. Telecom Association. Our trade association 
represents everyone from small, rural co-ops, to mid-size companies 
like CenturyTel, to some of the largest communications providers in the 
world. To continue growing, competing and investing, our company must 
be at parity with our competitors.
    What can Congress do?

 Move away from silo-based regulation where the treatment depends on 
        how a company is categorized rather than the service it 
        provides.
 Support greater regulatory flexibility at both the federal and state 
        levels to create and promptly offer products and services that 
        respond to customer demands.

E. Ensure Regulators Make Internet-time Decisions.
    I've described several key areas where decisions have simply taken 
too long: Clarifying universal service policy, reforming intercarrier 
compensation, ensuring that companies don't evade their responsibility 
to pay for the networks they use. How VoIP traffic is classified is 
another area where delay has created uncertainty, as we saw in the 
FCC's recent Madison River consent decree, where the parties did not 
know what their duties would be because the FCC had not clarified them. 
These and other important decisions in some cases have been pending for 
years. As you reform the substance of telecom law, I hope you will also 
address the process through which decisions are made.
    What can Congress do?

 Consider deadlines for agency decisions.
 Require the agency to hear from witnesses, or to deliberate face-to-
        face in important proceedings.

 V. CONCLUSION--THIS COMMITTEE'S ACTIONS WILL HELP BUILD THE FRAMEWORK 
        FOR TOMORROW'S TELECOMMUNICATIONS NETWORKS AND SERVICES

    Mr. Chairman, I thank you for holding this hearing. Without 
question, VoIP is worthy of our attention and enthusiasm. However, it 
also is important to bear in mind that VoIP is but one compelling 
example of what IP can contribute to the nation's economy and 
consumers. I understand that this Subcommittee also soon will explore 
IPTV. Just as the voice marketplace is being transformed by VoIP, local 
phone companies are eager to enter the competitive fray in digital 
television, offering consumers an additional choice beyond cable and 
satellite--and a true market alternative to cable's bundle of voice, 
video and data all on one bill.
    We too are excited about the future. We are excited about deploying 
new technologies and creating new services for our customers and 
communities. Because we work with them every day, we believe in the 
potential of IP and other communications innovations to advance our 
economy and our quality of life. We appreciate your hard work as you 
craft telecommunications law for a new century. Your decisions will 
shape the financial community's views of what investments to support. 
We are eager to work with you! I thank you for the opportunity to join 
you today. I look forward to your questions.

    Mr. Upton. All right. Thank you.
    Mr. Rutledge. Welcome back.

                 STATEMENT OF THOMAS M. RUTLEDGE

    Mr. Rutledge. Thank you, Chairman Upton and members of the 
subcommittee. My name is Tom Rutledge, and I am the Chief 
Operating Officer of Cablevision Systems Corporation in New 
York. I also serve on the Executive Committee of the National 
Cable and Telecommunications Association. Thank you for the 
opportunity to appear before you today and to discuss the 
issues surrounding the deployment of Voice-over Internet 
Protocol, VoIP services.
    The regulatory policy framework embodied in the 
Telecommunications Act of 1996 has facilitated the significant 
investment in state-of-the-art networks necessary for the 
deployment of advanced services. Simultaneously, the 
development of technology to transmit voice calls using 
Internet protocols has enabled Cablevision and other cable 
operators to use these broadband networks to provide customers 
with exciting services, including Voice-over IP. With more than 
1.3 million customers receiving VoIP services nationally, VoIP 
has emerged as a lower cost means to accelerate the long-sought 
goal of facilities-based local competition. In addition, VoIP 
customers can customize their communications options in a 
myriad of ways not possible with traditional circuit-switched 
technology.
    The stable deregulatory framework will allow VoIP and 
circuit-switched voice providers to continue to deliver 
increased value and technology to consumers.
    Since 1998, Cablevision has invested $5 billion in a two-
way broadband network that reaches 4.4 million homes in the New 
York metropolitan area. Since 1996, the cable industry as a 
whole invested almost $95 billion, roughly $1,300 per customer 
to upgrade more than 1 million miles of cable plant.
    This investment has allowed cable operators to offer a 
range of communication services over a fiber optic platform to 
approximately 95 percent of homes nationwide. Today, 
Cablevision offers analog and digital video, video on demand, 
15 high-definition television services, interactive services, 
high-speed Internet access, and voice services to all of the 
4.4 million homes passed by our network.
    Our VoIP service, ``Optimum Voice,'' is one of the most 
successful products, one of our most successful products. We 
launched Optimum Voice at the end of 2003, and today 
Cablevision serves 350,000 customers, and we are adding over 
1,000 customers per day. For a flat fee of $34.95, Optimum 
Voice includes unlimited local, regional, and long distance 
calling as well as advanced calling features, full E-911 
service, and the ability to meet law enforcement's authorized 
requests for surveillance.
    Optimum Voice also includes a suite of IP applications that 
allow customers to forward calls to three different locations 
simultaneously, to retrieve voice mail on e-mail, and to 
customize the way they want to receive voice communications by 
using an interactive web portal. We, like our cable colleagues, 
will continue to add features that will make our VoIP service 
an increasingly valuable communications tool for our customers.
    The introduction of new technologies, such as VoIP, 
presents an opportunity to reexamine the rules applicable to 
voice entrants and to develop a Federal policy framework for 
VoIP that supports its continued rapid deployment. The 
appropriate policy framework would continue the availability of 
the right to interconnect and exchange traffic with other 
providers, the right to obtain telephone numbers, and the right 
to access the facilities and resources necessary to provide 
VoIP customers with full and efficient 911 and E-911 services. 
It is also critical to ensure a rational and equitable system 
of intercarrier compensation and to reform universal service in 
a manner that maintains its goals while benefiting from 
economic opportunities presented by new technologies.
    While advancing this approach, we recognize that VoIP 
providers have a responsibility to meet important social policy 
and security goals. Toward that end, the cable industry has 
worked closely with the FBI, the Justice Department, and other 
law enforcement agencies to meet those security goals.
    This Federal policy framework would enable VoIP providers 
to continue to innovate and compete freely while ensuring the 
fulfillment of important policy objectives. Most importantly, 
such an approach would continue to support the principle of a 
predictable, national framework for the development of these 
inherently interstate services. The legislation put forward by 
Representative Pickering last year offered a strong start 
toward achieving these goals, and we look forward to working 
with the committee this year.
    Although the primary focus of this hearing is Voice-over 
IP, there has been much talk lately about video-over IP 
technology. Unlike VoIP, IP video services remain largely in 
the conceptual stage with many economic and technical questions 
yet unanswered. While these issues are not right for 
legislative action, it would be appropriate for Congress to 
examine how the emergence of IP video may affect the whole 
media industry, including such matters as non-discriminatory 
deployment, public, educational, and governmental access, 
compensation to municipalities for the use of public rights-of-
way, broadcaster and sports programming, localism, copyright, 
syndication, and the appropriate role of State and local 
governments. Any recommendations emerging from this review 
should be applicable to all multi-channel video-programming 
providers.
    In the meantime, all companies that propose to provide 
cable service, including telephone companies, must comply with 
existing Federal, State, and local laws, including securing 
cable franchises prior to constructing and not redlining 
neighborhoods.
    Today we are seeing a realignment of mass-market 
communications. This is an exciting new market for the cable 
industry and its customers. We look forward to continuing to 
work with the committee to develop a public policy for VoIP 
that fosters competition and consumer choice.
    Thank you again for this opportunity, and I welcome your 
questions.
    [The prepared statement of Thomas M. Rutledge follows:]

    Prepared Statement of Thomas Rutledge, Chief Operating Officer, 
  Cablevision Systems Corp. Appearing on Behalf of National Cable and 
                     Telecommunications Association

    Chairman Upton and Members of the Subcommittee, my name is Tom 
Rutledge, and I am the Chief Operating Officer of Cablevision Systems 
Corporation in New York. I also serve on the Executive Committee of the 
National Cable and Telecommunications Association. Thank you for the 
opportunity to appear before you today to discuss issues surrounding 
the deployment of voice over Internet protocol--or ``VoIP''--services.

                                OVERVIEW

    The deregulatory policy framework embodied in the 
Telecommunications Act of 1996 has facilitated the significant 
investment in state of the art networks necessary for the deployment of 
advanced services. Simultaneously, the development of technology to 
transmit voice calls using Internet protocols has enabled Cablevision 
and other cable operators to use these state-of-the art networks to 
provide customers with exciting and valuable communications services, 
including Voice-over-IP. With more than 1.3 million customers receiving 
VoIP services nationwide, VoIP has emerged as a lower cost means to 
accelerate the long-sought goal of facilities-based local voice 
competition. In addition, VoIP customers can customize their 
communications options in myriad ways not possible with traditional 
circuit-switched technology.
    A stable deregulatory framework that limits any regulation to those 
rules necessary for specific social and competitive purposes will allow 
VoIP and circuit switched voice providers to continue to deliver 
increased value and technology to consumers.

           CABLE INVESTMENT HAS LED TO NEW VOICE COMPETITION

    Since 1998, Cablevision has invested $5 billion in a two-way 
broadband network that reaches 4.4 million homes in the New York metro 
area. Since 1996, the cable industry as a whole invested almost $95 
billion--roughly $1,300 per customer--to upgrade cable systems by 
rebuilding more than one million miles of cable plant.
    This investment has allowed cable operators to offer a range of 
communications services over a fiber optic platform to approximately 
95% of the homes nationwide. Today, Cablevision offers analog and 
digital video, video on demand, 15 high-definition television services, 
interactive services, high speed Internet access and voice services to 
all of the 4.4 million homes passed by our network.
    Our VoIP service, ``Optimum Voice,'' is among the most successful 
products we have ever offered. We launched Optimum Voice at the end of 
2003, and today, a little over a year later, Cablevision has 350,000 
customers, and we are growing at rate of greater than 1,000 customers 
per day. Optimum Voice provides customers with not only low cost voice 
service but an array of advanced features not previously available. For 
a flat fee of $34.95, Optimum Voice gives customers limitless local, 
regional and long distance calling as well as advanced calling 
features--a substantial discount over less robust ``phone'' service. It 
includes full E911 service and is capable of meeting law enforcement's 
authorized requests for surveillance.
    Optimum Voice also includes a suite of IP applications that allow 
customers to forward calls to three different locations simultaneously, 
to send and retrieve voice messages on e-mail. An interactive web 
portal lets subscribers customize the way they want to receive voice 
communications day-by-day, hour-by-hour. In addition, our broadband 
network will allow customers to screen voice calls on their televisions 
and conduct audio or video conferences on their computer. We, like our 
cable colleagues, will continue to add dozens of new features that will 
make Optimum Voice an increasingly valuable communications tool for our 
customers.

                 DEREGULATORY APPROACH TO VOIP SERVICES

    The introduction of new technologies such as VoIP presents an 
opportunity to reexamine the rules applicable to voice entrants, and to 
develop a federal policy framework for VoIP that supports its continued 
rapid deployment. The appropriate policy framework would continue the 
availability of the right to interconnect and exchange traffic with 
other providers; the right to obtain telephone numbers; and the right 
to access the facilities and resources necessary to provide VoIP 
customers with full and efficient 911/E911 services. It is also 
critical to ensure a rational and equitable system of intercarrier 
compensation and to reform of universal service in a manner that 
maintains its goals while benefiting from the economic opportunities 
presented by new technologies.
    While advancing this approach, we recognize that VoIP providers 
have a responsibility to meet important social policy and security 
goals. Toward that end, the cable industry has worked closely with the 
FBI, the Justice Department and other law enforcement and public safety 
agencies and organizations to ensure that these security goals are met.
    We believe that this federal policy framework would enable VoIP 
providers to continue to innovate, earn a return on their investment, 
and compete freely while ensuring the fulfillment of important policy 
objectives. Most importantly, however, such an approach would continue 
to support the principle of a predictable, national framework for the 
development of these inherently interstate services. The legislation 
put forward by Representative Pickering last year offered a strong 
start toward achieving these goals, and we look forward to working the 
Committee this year.
    Although the primary focus of this hearing is voice over IP, there 
has been much talk lately about video over IP technology. Unlike VoIP, 
IP video services remain largely in the conceptual stage, with many 
economic and technical questions still to be answered. While these 
issues are not ripe for legislative action at this time, it would be 
appropriate for Congress to examine how the emergence of IP video may 
affect the whole media industry including such matters as non-
discriminatory deployment, public, educational and governmental access, 
compensation to municipalities for use of the public rights-of-way, 
broadcaster and sports programming, localism, copyright, syndication, 
and the appropriate role of state and local governments. Any 
recommendations emerging from this review should be applicable to all 
multichannel video providers.
    In the meantime, all companies that propose to provide cable 
service, including telephone companies, must comply with existing 
Federal, State and local laws, including securing cable franchises 
prior to construction and not redlining neighborhoods perceived as less 
desirable.

                               CONCLUSION

    Today we are seeing a realignment of mass-market communications. 
This is an exciting new market for the cable industry and its 
customers, and a challenging opportunity for policymakers who are 
interested in facilitating the continued development of facilities-
based competition in voice services. We look forward to continuing to 
work with the Committee to develop a public policy that fosters 
competition and consumer choice.
    Thank you again for this opportunity, and I welcome your questions.

    Mr. Upton. Thank you.
    Mr. Shlanta.

                    STATEMENT OF MARK SHLANTA

    Mr. Shlanta. Mr. Chairman, members of the committee, thank 
you for the opportunity to be here today. My name is Mark 
Shlanta, and I am the Chief Executive Officer of SDN 
Communications. I would like to thank you for inviting me to 
testify before you today and to provide a rural perspective as 
you look further into IP-enabled services and consider 
rewriting the Communications Act.
    SDN Communications is the information superhighway for 
South Dakota. Our story is one of innovation and cooperation by 
27 South Dakota independent telephone companies to create the 
State's most extensive fiber optic network.
    Today, SDN and its members provide Internet service to 
thousands of consumers, hundreds of commercial, and dozens of 
wholesale customers via our DSL, cable modem, and fixed 
wireless services. We have grown to become one of the regions 
top Internet providers by offering our customers access to 
multiple IP networks via one connection to SDN. In the future, 
we expect to serve more customers through developing additional 
centralized IP services.
    IP-enabled services and all communication services rely 
upon a healthy and robust infrastructure to reach end users. 
The one issue that must be resolved to ensure the existence of 
a robust, nationwide, ubiquitous communications network that 
can support IP-enabled and other advanced services in the 
future is cost recovery. Without adequate cost recovery, there 
will be no network for any communication services, including 
VoIP.
    The two main aspects for cost recovery that policymakers 
are talking most about are intercarrier compensation and 
universal service. Both are not simply regulations but are 
industry responsibilities. There is general consensus that the 
way in which funds are collected and allocated within these two 
industry responsibilities must be changed to meet the market 
realities of today.
    The solution for intercarrier compensation is a simple one. 
If any service provider uses another provider's network, that 
service provider must compensate the other provider for the use 
of their facilities and at an appropriate rate. This notion is 
not complex. It is simply ensuring that all players stand up to 
their responsibilities.
    Many call intercarrier compensation or access charges an 
implicit subsidy. I call them 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. I ask you all to 
tell me why should a new service provider be able to access 
this network for free? We seem to be focusing this debate on 
why should new IP-enabled service providers be paying access 
charges. To those of us that toiled to finance the deployment 
of infrastructure, the question is why should they not.
    I agree that we do not want to bog down new entrants with 
unnecessary regulations, but allowing 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 shouldn't be playing. IP-
enabled service providers should be required to pay access 
charges when their services originate or terminate on the PSTN 
regardless of their regulatory classification.
    The solution for universal service is also a simple one. 
The base of contributors must be expanded to include all 
telecommunication service providers, including cable, wireless, 
and IP-enabled service providers since they benefit from the 
network. And yes, this quite possibly could mean small rural 
companies might end up contributing more tomorrow than they do 
today. It is a responsibility they are willing to share in, to 
ensure that all Americans, and not just the privileged, are 
able to enjoy the benefits of this technological era.
    Many policymakers and others seem to think that once a 
national broadband network is built there will be no more need 
for a universal service program, but that ignores the reality 
that networks must also be maintained and upgraded. The narrow 
band copper network has been around for over 100 years and yet 
there is still an urgent and recognized need for universal 
service support. Why do we believe that network upgrades and 
maintenance will be different in a broadband world? Despite 
technological advances, it is and will continue to be 
significantly more expensive to serve rural America, even after 
a ubiquitous broadband network is built.
    Universal service is a long-standing public policy goal and 
a goal I have got to believe we still want to flourish. 
Congress wrote universal service into law in 1934 and 
reinforced it in 1996 to ensure consumers in rural and high-
cost areas have access to comparable and affordable 
telecommunication services. This has only been fully realized 
through the infrastructure deployed by community-based 
telecommunication providers who connect rural America to the 
rest of the world. These rural incumbent local exchange carrier 
networks serve approximately 40 percent of the geographic area 
of the United States and nearly 80 percent of my State and 
other rural States. Allowing new providers to use these 
networks without adequate compensation will compromise this 
network and then a lot of--and that is a lot of country to 
leave behind. Deploying advanced infrastructure that is fully 
capable of offering a combination of two-way voice, video, and 
data options should become the hallmark of our national 
universal service policy.
    Thank you, Mr. Chairman.
    [The prepared statement of Mark Shlanta follows:]

     Prepared Statement of Mark Shlanta on Behalf of the National 
               Telecommunications Cooperative Association

                              INTRODUCTION

    Good morning. My name is Mark Shlanta. I am the Chief Executive 
Officer of SDN Communications of Sioux Falls, SD. I would like to thank 
you for inviting me to testify before you today to provide a rural 
perspective as you look further into IP-Enabled services and consider 
rewriting the Communications Act.

                            COMPANY DYNAMICS

    SDN Communications is the information superhighway for South Dakota 
and beyond. Its story is one of innovation and cooperation by 27 South 
Dakota independent telephone companies to create the state's most 
extensive fiber optic network.
    Today the region's premier healthcare facilities, banks, 
agricultural businesses and government agencies use SDN's services for:

 Switched and dedicated long distance
 Connecting the home office computers to those in branch locations
 High-speed Internet
 Video conferencing
 Hardware to make the broadband connections work

                             COMPANY AND IP

    SDN Communications and its member owners have been offering 
Internet services since 1997. At that time, our service was simply dial 
up with several ``high speed'' customers being served via DS1 circuits. 
We began offering DSL, cable modem and fixed wireless services in 2000 
to fulfill the growing need for greater connectivity speeds. Today SDN 
and its members provide service to thousands of consumer, hundreds of 
commercial, and dozens of wholesale customers. We have grown to become 
one of the regions top Internet providers by offering our customers 
access to multiple IP networks via one connection to SDN. This multiple 
IP network approach has allowed SDN to serve businesses from all across 
the country with data storage applications. In addition, our commercial 
customers can enjoy an Internet and long distance service via one 
connection to their office. In the future, we expect to serve more 
customers through developing centralized IP services.

                            REGULATION OF IP

    There is really only one issue that must be resolved to ensure the 
existence of a robust nationwide ubiquitous communications network that 
can support both IP-enabled services and other advanced services. That 
one issue is full cost recovery. Without adequate cost recovery there 
will be no network for IP-enabled services, or any other type of 
services for that matter, to reach consumers be it wireline, wireless 
or some other medium.
    The two main aspects of cost recovery that policymakers and the 
public alike are talking most about are intercarrier compensation or as 
I like to call it ``the cost of doing business''--and universal 
service. These are not industry regulations; they are industry 
responsibilities. In general, I think the industry as a whole believes 
that the way in which funds are collected and distributed for 
intercarrier compensation and universal service must be changed to 
ensure our network continues to exist and be upgraded. The solution for 
intercarrier compensation is a simple one: 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. The solution for universal service is 
also a simple one: the base of contributors must be expanded to include 
all telecommunications service providers--and yes, this quite possibly 
could mean that small rural companies might end up contributing more 
tomorrow then they do today. It is a responsibility we are willing to 
share to ensure that all Americans, and not just the privileged, are 
able to enjoy the benefits of this technological era.
    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? 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 regulatory arbitrage.
    I concur that the current patchwork of intercarrier compensation 
needs to be reformed, however it needs to be reformed in such a way to 
put all telecommunications services on a level playing field regardless 
of technology used. This regime should be cost based and applied 
equally across communications platforms. IP-enabled service providers 
should be required to pay access charges when their services originate 
or terminate on the PSTN, regardless of their regulatory classification 
as information or telecommunications service. Indeed, I believe these 
classifications are irrelevant in an IP world, where the functions that 
the network provides are what matters--not the service classification. 
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 universal 
service policy.
    Many policy-makers, think tanks and others seem to think that once 
a national broadband network is built there will be no more need for 
the universal service program. But aren't we ignoring the large fact 
that networks must also be maintained and upgraded? Many people think 
that technological advancements will make universal service obsolete. 
The narrowband copper network has been around more than 100 years, yet 
there is still an urgent and recognized need for universal service 
support. Why do we believe things will be different in a broadband 
world? In rural America, these costs are always going to be 
significantly more, even after a complete network is built. Yes, 
technological advancements are helping to reduce the cost, even in 
rural areas, but it still is always going to be more expensive to serve 
rural America due to low population density, expansive distances, and 
often-rugged terrain. Without continued universal service support our 
national goal of universal broadband access may never be realized.
    I feel the best way to reform universal service is to broaden the 
base of contributors to include all communications providers. Cable, 
wireless, and satellite broadband Internet access service providers, 
and VoIP and other IP-enabled service providers should contribute since 
they all benefit from the national network.
    Universal service is a long-standing public policy goal, and a goal 
I believe we still want to flourish. Congress wrote sections 254(b)(3) 
and 151 of the Communications Act of 1934 that states consumers in 
rural and high-cost areas should have access to comparable and 
affordable telecommunications services to ensure that this public 
policy goal was met. This has only been fully realized through the 
infrastructure deployed by community-based telecommunications providers 
who connect rural America to the rest of the world. These rural 
incumbent local exchange carrier networks serve approximately 40% of 
the geographic area of the United States and nearly 80% of my state and 
other rural states. Allowing new providers to use these networks 
without adequate compensation will compromise this network and that is 
a lot of our country to leave behind.
    We are not asking for special treatment. We are only asking for a 
level playing field. All new entrants into the communications 
marketplace should uphold our current industry responsibilities of 
intercarrier compensation and universal service. Carriers that use our 
networks should provide us with just and equitable compensation just as 
we expect to pay them such compensation for the use of their networks.
    Again, all service providers and consumers benefit from a robust 
national network infrastructure. The current structure of cost recovery 
enabled us to achieve our impressive 94% telephone penetration rate. In 
order to achieve those same penetration rates with broadband and for 
whatever new technology will be offered after broadband we need to 
modify the existing regime but having the regime in place is absolutely 
critical.
    Interconnection and access to infrastructure, content, roaming, 
spectrum, rights-of-way, and adequate financing are all critical to the 
operational success of a nationwide integrated communications network. 
It is particularly important that such access be at appropriate rates, 
terms, and conditions. In light of the vertical integration that is 
taking place throughout the communications industry, it is more 
important than ever that mechanisms, such as prohibitions against 
nondisclosure agreements and strictly defined negotiating parameters 
are in place to ensure such access is a reality. In addition, 
government-mandated default rates, terms, and conditions that ensure 
full cost recovery for rural carriers should be applicable when 
negotiations fail.
    Throughout the course of our history, America has been recognized 
as a pre-eminent technological and economic force. Today however, many 
would have us believe we are losing that edge. How can this be 
considering the ingenuity and commitment that is displayed every day by 
leaders such as those making up the rural sector of the communications 
industry?
    Former Congressman and father of fiber optics, Amo Houghton, 
recently noted, ``For years, Corning and other optical equipment 
companies preached fiber to the home or ``fiber to the premises'' as 
the term has developed. We told the communications companies that they 
could generate more revenue and cut their maintenance costs, if they 
would extend fiber to the home or business. It had to happen 
ultimately, but we thought it would start in urban areas and roll out 
slowly to rural areas. We were wrong. The reverse happened. Instead, 
the pioneers were rural telcos and small municipalities. Some of NTCA's 
members have been extremely visionary in this regard. I've always been 
impressed by how progressive and resourceful rural telcos are--I think 
they really embody the spirit of American enterprise--always have.'' 
1
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    \1\ March/April issue of Rural Telecommunications Magazine
---------------------------------------------------------------------------
    Rural carriers are using a multitude of technologies to bring 
broadband to their communities and will continue to be leading 
innovators in the broadband marketplace.
    We look forward to working with you as a full partner as you look 
to rewrite the Communications Act. Thank you again for inviting me to 
testify before you today.

                                SUMMARY

    IP-enabled services and all communications services rely upon a 
healthy and robust network infrastructure to reach end users. The one 
issue that must be resolved to ensure the existence of a robust 
nationwide ubiquitous communications network that can support IP-
enabled and other advanced services in the future is cost recovery. 
Without adequate cost recovery there will be no network for any 
communications service, including VoIP, to reach consumers be it 
wireline, wireless or some other medium.
    The two main aspects of cost recovery that policymakers are talking 
most about are intercarrier compensation and universal service. Both 
are not simply regulations but are industry responsibilities. There is 
general consensus that the way in which funds are collected and 
distributed within these two industry responsibilities must be changed 
to meet the market realities of today. The solution for intercarrier 
compensation is a simple one: 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. 
Carriers that invest millions in network infrastructure should receive 
compensation from those that utilize it in lieu of building their own 
network.
    The solution for universal service is also a simple one: the base 
of contributors must be expanded to include all telecommunications 
service providers, including cable, wireless, and satellite broadband, 
and IP-enabled service providers since they benefit from the network. 
Many policymakers and others seem to think that once a national 
broadband network is built there will be no more need for the universal 
service program. But that ignores the reality that networks must also 
be maintained and upgraded. Despite technological advances, it is, and 
will continue to be, significantly more expensive to serve rural 
America even after a ubiquitous broadband network is built.
    Again, all service providers and consumers benefit from a robust 
national network infrastructure. The current structure of cost recovery 
enabled us to achieve our impressive ninety-four percent national 
telephone penetration rate. In order to achieve those same penetration 
rates with broadband and what is after broadband we need to modify the 
existing cost recovery programs, but having the programs in place is 
absolutely critical.

    Mr. Upton. Well, thank you all. And thanks again for the 
disruption of the votes a little bit earlier this morning.
    Most of you touched on the universal service, Mr. Shlanta 
probably the most, and suggested that all communication service 
providers should contribute equally to the Universal Service 
Fund in order to sustain the fund. I would say that it is clear 
to most members that the Universal Service Fund does need, 
probably, more than a tune-up. It needs an overhaul. Some have 
suggested a flat fee per phone line as a solution. I would be 
interested in your thoughts and other thoughts that you might 
want to expand in terms of what we ought to do as it relates to 
VoIP for a level playing field for all of the different voice 
providers and, I guess with the exception of Mr. Melcher, Mr. 
Erickson, we will start with you to get your ideas and we will 
go down the line.
    Mr. Erickson. Thank you.
    My first reaction to the suggestion of a flat fee for a 
phone line, my concern with that is that it presumes the 
current technical structure of the network. In an IP-enabled 
voice service, connections are essentially transient and 
temporary. The same thing with number assignments. Numbers are 
just a temporary kind of addressing scheme, and they can be 
turned on and off. So I think that from a policy standpoint for 
universal service, my personal view is that a percentage of 
revenue is probably the easiest to implement. I understand 
there are huge complexities in terms of what revenue applies 
and what doesn't, but I think trying to presume from a 
strategic perspective the ongoing structure of networks is, you 
know, I would hate to see us back in the same situation a few 
years from now when, you know, a phone line really isn't a 
phone line anymore.
    Mr. Upton. Mr. Grivner?
    Mr. Grivner. Yeah, I think that one of the difficulties 
with the phone line is it is kind of counter to what broadband 
is. Broadband is many phone lines. So it is difficult to say 
that you are going to apply a phone line concept to a broadband 
line, which could be technically or virtually 24 phone lines in 
that one line. So I think there is some validity to a 
percentage of revenue. I think that, as you said, the Universal 
Service Fund probably needs more than a tune-up. I think it 
needs a total look on how it is done and distributed. I think 
it needs to continue to exist but certainly not in its current 
form.
    Mr. Upton. Ms. Puckett?
    Ms. Puckett. The key objective is to broaden the base. In 
terms of how, we don't support a primary line, because you 
really build a network beyond a primary line. You don't build a 
network primary line at a time. But we really could support a 
percent of revenue. Connection base is a little bit more 
concerning, just in terms of where the technology is going to 
go. But percent of revenue base, the key message here would be 
broaden the base.
    Mr. Upton. Mr. Rutledge?
    Mr. Rutledge. While we are currently paying into the USF, 
we do think an overhaul is probably in order, and if we are 
going to decide to raise this money, we need to consider what 
kinds of technologies can fulfill the public policy objectives, 
and I think there is a whole new world of opportunity in that 
direction. And in terms of collecting it, I think people will 
have phone numbers for a long time to come, and there are--if 
we do go with that scheme, there will be opportunities to 
arbitrage it, which will create problems, but it may be an 
opportunity for us. And we would be open to exploring that.
    Mr. Upton. Mr. Shlanta?
    Mr. Shlanta. Yes, Chairman Upton. As I stated in my 
testimony, I believe that contributions to universal service 
should be widened. It should include not only wireline and 
wireless, but IP-enabled services. And I believe the simplest 
way to collect that universal service contribution is through a 
revenue-based contribution.
    Mr. Upton. Mr. Erickson, in your testimony, you stated that 
States should have an active role in fostering competition and 
protecting their citizens. I am just curious what you think 
that role ought to be. Given that VoIP is an interstate 
service, how do States--what role should States have as they 
regulate an interstate service, if you meant that at all? I am 
not sure.
    Mr. Erickson. I did mean that. You know, to me--or my view 
is that the States are most active in ensuring that consumer 
requirements are met, and that includes public safety. They 
obviously fund support and with local municipalities emergency 
services. Obviously all of the, you know, fair business 
practices, those things are all--or many of them are enforced 
at the local level. I don't believe that we need a lot of State 
involvement in the economic design of the intercompensation 
schemes and things like that, but I think, you know, in terms 
of ensuring that customers are being well served, I think local 
involvement is an important part of it.
    Mr. Upton. Mr. Stupak.
    Mr. Stupak. Thank you, Mr. Chairman.
    Mr. Chairman, first of all, I would like to ask unanimous 
consent to enter into the record a March 14 letter by the 
chairman. There are four of us with the Congressional rural 
caucus on--task force on telecommunications on--regarding the 
Level 3 forbearance petition. I would like to enter it into the 
record to supplement my opening statement, and I will ask them 
some questions along those lines.
    Mr. Upton. Without objection.
    [The information referred to follows:]

                      Congress of the United States
                                   House of Representatives
                                                     March 14, 2005
The Honorable Michael Powell
Chairman
Federal Communications Commission
445 Twelfth Street SW
Washington, DC 20554
    Dear Chairman Powell: We are writing regarding the Level 3 
forbearance petition currently pending before the Federal 
Communications Commission. As members of the Congressional Rural 
Caucus, we are concerned about the impact granting such a petition will 
have on rural telecommunications.
    We appreciate your attempts to develop a broad, comprehensive 
proceeding to deal with the complex set of issues posed by the current 
intercarrier compensation system. A comprehensive approach is the 
appropriate way to accomplish the difficult task of adapting that 
system to the evolving realities of today's telecommunications 
marketplace.
    The Level 3 petition takes an opposite approach. It attempts to 
single out a narrow issue among this complex set of issues for 
immediate resolution. Such an approach would effectively prejudge some 
of the most important issues raised in the Commission's broader 
proceeding, without necessarily taking into account the impact granting 
of the petition would have on intercarrier compensation, universal 
service, and rural telecommunications infrastructure as a whole.
    The Level 3 petition also contains what it claims is a ``rural 
exemption.'' Yet the petition itself excludes an unspecified number of 
rural markets from this protection immediately and exposes remaining 
rural markets to a case-by-case review and subsequent exclusion.
    We have strong concerns about the impact this petition would have 
on rural America, in the absence of comprehensive intercarrier 
compensation reform. Rural local carriers disproportionately rely upon 
access revenue and universal services support to make needed 
investments in telecommunications infrastructure. The Level 3 petition 
would result in the gradual erosion of these two vital funding sources.
    In conclusion, we urge you not to take a piecemeal approach by 
granting the Level 3 petition. The FCC should continue to pursue a more 
comprehensive resolution to intercarrier compensation issues.
            Sincerely,
John Peterson, Co-Chairman, Congressional Rural Caucus; Allen Boyd, 
        Co-Chairman, Congressional Rural Caucus; Gil Gutknecht, Co-
   Chairman, Task Force on Telecommunications, Congressional Rural 
Caucus; Bart Stupak, Co-Chairman, Task Force on Telecommunications, 
Congressional Rural Caucus; Lincoln Davis, Member of Congress; Rick 
                                       Boucher, Member of Congress;
        Phil English, Member of Congress; Bob Etheridge, Member of 
                                                          Congress;
       Ruben Hinojosa, Member of Congress; Earl Pomeroy, Member of 
                                                          Congress;
 Tom Latham, Member of Congress Jo Ann Emerson, Member of Congress;
       John McHugh, Member of Congress; and Jerry Moran, Member of 
                                                           Congress

    Mr. Stupak. Thank you, Mr. Chairman.
    Ms. Puckett, if I may, those of us who serve rural areas 
here in Congress are particularly concerned about what we can 
do to get broadband built out to the more rural parts of 
America. You have given us a pretty good idea on what goes into 
a network to make it broadband compatible. While I know these 
are complex issues, can you help us by highlighting the top two 
or three policy initiatives that you would most effectively 
ensure--that would most effectively ensure that broadband is 
built out to rural America as quickly as possible? And then 
second, since we are talking a little bit about funding, the 
funding mechanisms for getting advanced services to rural 
America seems to be under an increasing level of attack. Even 
as companies like yours are investing aggressively to get 
broadband to all of your customers, what happens to your 
efforts to build out your networks if mechanisms like the 
intercarrier compensation and universal service are 
compromised? Would you care to comment on those two for me?
    Ms. Puckett. Thank you.
    In terms of the broadband build out, you know, broadband 
clearly--and I think you mentioned it in your opening comments, 
clearly enables the community's economy. We believe--we have 
seen the economic development magic that happens with 
broadband. In terms of the opportunity there, looking at 
universal service in terms of offering a broadband connection I 
think is an option in broadening USF definition. Right now, it 
says advanced communication. How do you want to define that? Do 
you stop at voice, or do you allow broadband? So we would 
highly promote that.
    The second question about funding needs, what happens is 
basically a couple of things. In terms of Universal Service 
Fund, our company has experienced about a $10 million decline 
year over year--last year, 2004, than the prior year. And this 
year, we project, we are a public company by the way, about a 
$15 million decline. Public companies, you know, have 
responsibilities to shareholders to drive economies and to show 
that they are improving from a productivity cost efficiency 
standpoint. So I think that the USF fund needs to be relooked 
at. There is an indexing piece that for the first time has gone 
down. Access lines, when they actually developed the index back 
in the 1980's, it was based on access line growth. They never 
assumed decline. And CPI, this is the first year, in 2005, that 
the index is not growing, that the fund will not grow because 
access lines have declined more than CPI. That is a very, very 
serious situation. I think we have a very near-term opportunity 
for that.
    And then just in addition, you know, just the 
responsibility to USF, the number of wireless CTCs that have 
been accepted. There is no fiduciary responsibility. You know, 
the States just have an open book. We are encouraged by the, 
hopefully, order that will be coming out from the FCC to at 
least make sure that there are standards for people who are 
accepting USF. The question is it is two different models. Do 
you want to be more regulated or you don't at an executive 
level?
    Mr. Stupak. Thank you.
    Mr. Erickson, there have been some questions about whether 
VoIP providers should be contributing along with all other 
types of providers to the Universal Service Fund and paying 
intercarrier compensation like the other providers. Since these 
are the two primary funding mechanisms that are making it 
possible to bring broadband to the most rural parts of America, 
isn't it in your interest to support these mechanisms? Don't 
your services need to ride on broadband facilities that others 
have built? And does your company currently pay to support 
either of these funding mechanisms today?
    Mr. Erickson. I do agree that we should be, as an industry, 
contributing toward universal service. Absolutely. I think we 
need to find a mechanism to do that in an efficient way, and 
the current structure makes it difficult for us to do that. Our 
services are defined as interstate, right now, what that would 
mean if we were applying it sort of strictly by the letter of 
the law, the 11-percent contribution factor would apply to all 
of our revenue, which is, you know, for regular phone companies 
it actually translates to more in the line of 2 percent or so.
    And to answer your second question, are we currently 
paying, we are not paying directly. We are paying indirectly, 
but we certainly would welcome the reform that would allow us 
to contribute in an obvious and transparent manner toward what 
we agree to be an important public----
    Mr. Stupak. How are you paying indirectly?
    Mr. Erickson. Through the payments that would--all of our 
services are terminated through other phone companies, and they 
are paying on their side into the Universal Service Fund for 
that traffic, so----
    Mr. Stupak. So you are paying them, and then they in theory 
pay into the Universal Service Fund?
    Mr. Erickson. Thank you, Mr. Chairman.
    Mr. Upton. Mr. Pickering.
    Mr. Pickering. Thank you, Mr. Chairman.
    If I could just ask a few questions as we try to develop 
legislation and consensus on the committee, some of the issues 
that--what I would like to see is your views and then put 
across the board. One, on the intercarrier compensation, my 
bill would require--that I introduced last year and it is my 
intent this year, a time certain for the FCC to complete the 
intercarrier compensation. Industry has had a chance to try to 
complete a volunteer agreement. I believe it has come close, 
but it is not yet done. I don't know if a deadline in the FCC 
would be helpful to get the certainty and the requirement and 
the catalyst to achieve that, but would everybody on the panel 
support a requirement in legislation that would give a time 
certain, 180 days or some time period similar to that, for the 
FCC to complete an intercarrier compensation, taking into 
consideration the differences in rural markets and urban 
markets and looking at the best way to achieve a balance of all 
providers of telecommunication services or IP services.
    If I could, just quickly, would everybody support a time 
certain ICC--of the FCC?
    Ms. Puckett. Absolutely.
    Mr. Erickson. Yes. Yes, we would. Certainly it is important 
for us to make necessary investments and plan for the growth of 
our business in the network.
    Mr. Melcher. If I may, I am not a carrier, but we have a 
dog in this fight, because every time you jump from an 
incumbent or certificated carrier to one of these other service 
providers, depending on who they are in the greater Houston 
area, I was 50 cents out of my budget, so as the wireline, as 
Ms. Puckett described as the wireline account is declining, so 
is my revenue. At the same time, we are having to spend a lot 
of infrastructure upgrade money to accommodate these new 
technologies. So the user pays that we have been working under 
in this country, everybody gets a 911 fee on their phone bill, 
has a direct impact on my success to be able to deploy 
technologies to meet this new challenge. So we are not a 
carrier, but we certainly have an interest.
    Mr. Pickering. And would you support a mandatory compliance 
of cost recovery on E-911?
    Mr. Melcher. I think that, like technology and revenue, as 
long as we are able to be made whole and recover the costs that 
we have to spend on these new technologies, we have to have 
some mechanism. Our public safety budgets already are somewhat 
overburdened, and they vary from State to State. But without 
the ability to recover those costs, we have no choice. We will 
end up cutting service.
    Mr. Shlanta. Mr. Pickering, I believe that 180 days is too 
quick a timeline for the intercarrier compensation issues to be 
sorted out. I would encourage you, members of this committee, 
the same thing that I encouraged the FCC and that is to go 
slow. Take a comprehensive approach, as you examine all of the 
intercarrier compensation. There is more to intercarrier 
compensation than VoIP and access rates.
    Mr. Pickering. Do you have a time period that you would 
suggest?
    Mr. Shlanta. Twelve to 18 months would be a more sufficient 
period of time. It will take time. It is a complicated issue 
that needs a comprehensive review. To try to accelerate that I 
think it will force us to create decisions in a vacuum that 
will ultimately lead to more difficult items to reverse in the 
future.
    Ms. Puckett. Mr. Pickering, Karen Puckett. I would like to 
say one thing. I applaud the speed. As a businessperson, what 
we have here is a situation where all of us have questions 
about our business models. It is very hard to have the 
visibility in your strategic future on how to position your 
company if you don't know what the rules are going to be. So be 
at level three, I mean, that petition is more than a year old. 
We have been around the table as an industry working on this. 
We are not starting at ground zero. And whether it is, you 
know, 18 months, 6 months, or 12 months, hopefully it is less 
than 12 months, but we have to have visibility to know how to 
position our businesses for the future. Thank you.
    Mr. Pickering. We will call it a compromise at 9 months. 
How is that?
    Ms. Puckett. Okay.
    Mr. Pickering. Universal service, the approach in the bill 
that I introduced last year was to say to the degree that there 
is interaction between the PSTN and IP over voice, there would 
be a contribution, a proportionate contribution to USF, and 
again taking into factors different in rural markets to urban 
markets. Is that an approach that everybody at the table would 
support?
    Mr. Grivner. I would support it. My concern would be is it 
too limiting, though, because especially when you are dealing 
with VoIP traffic that may touch the PSTN. I think you would 
have to, I think, when you start looking at these services and 
we start using terms like interstate, intrastate, and local, 
those terms are terms that are going away very quickly. And so 
therefore, I don't know that I could define it that easily as 
just touching the PSTN. I would define it as a service that we 
are providing to consumers and customers. There needs to be 
some sort of even distribution on or off, either we regulate it 
or we don't, in terms of attacks, and then it applies to all 
services.
    Mr. Melcher. And touching the PSTN to get to 911 right now 
is the standard, off-the-shelf solution. But like in our own 
shop, we are developing these next generation tools. As a 
matter of fact, we have already tested them, so one of these 
providers could come directly into our shop without ever 
touching the PSTN, and we have got 43 dispatch centers around 
Houston that would never be included in that model, so that has 
to be taken into account as well.
    Mr. Pickering. One final question before my time expires.
    As I understand it, Vonage and other IP-related services, 
to be able to complete a 911 call, have to have access to the 
tandems on the routers, especially from the Bell companies. 
Currently, there is some progress but not complete acceptance 
from the Bell companies as far as allowing IP companies to have 
interconnection at the tandem, which is required to make the--
to complete a 911 call. I think the situation that we will hear 
later, or the example in Houston, is a perfect example. Should 
we require, as we go forward on this, interconnection for IP 
networks and applications, at least to the tandem of the 
incumbent networks?
    Mr. Melcher. For the majority of the country, that is the 
only way you are going to get into a 911 piece app, so the 
short answer is yes. As we look to next generation 911 
infrastructure, which we are aggressively pursuing in Texas, 
and I believe in the next 18 months--actually, in the next few 
months, you will see some of this traffic routed directly into 
the piece apps, but for the majority of Texas, I think you will 
see a lot of next generation work over the next 18 months where 
it wouldn't have to go through an incumbent selective routing 
tandem. It could go through, you know, the 911 selective 
routing cloud, if you will. But unfortunately, the majority of 
the infrastructure out there for 911 is very, very beholden to 
that incumbent local exchange carrier tandem. And without 
access to that and access to the data base as well, you will 
not see calls delivered to 911 piece apps in this country.
    Ms. Puckett. Mr. Pickering, I would just like to make one 
point. Public safety is very, very important, but I would ask 
that there is some respect for the burden put on some of the 
telecommunication companies. You know, we have spent millions 
of dollars preparing, and this is our own data base. And these 
companies that want to come and play, if 911 is an important 
part of their value proposition to the marketplace, that is the 
cost of doing business, and they need to get with it.
    Mr. Shlanta. Mr. Pickering----
    Mr. Pickering. But you wouldn't deny them access to your 
tandems, would you?
    Ms. Puckett. No, but I would just ask that we wouldn't 
carry the incremental burden of connecting them and whatever 
infrastructure is required.
    Mr. Pickering. There should be some compensation.
    Ms. Puckett. Correct, sir.
    Mr. Shlanta. Mr. Pickering, that is exactly what I was 
going to say. I believe that 911 and emergency services are a 
responsibility. They are not an expense, as they have been 
indicated earlier in terms of VoIP companies looking at them 
from a profitability standpoint. And with that responsibility, 
as Ms. Puckett indicated, the telecommunication companies 
across the country have invested millions of dollars in 
developing these data bases. It should have--and should expect 
adequate cost recovery for access to those data bases and 
access to those routing services.
    Mr. Pickering. Thank you, Mr. Chairman.
    Mr. Upton. Mr. Gonzalez.
    Mr. Gonzalez. Thank you very much, Mr. Chairman.
    And I am going to leave all of the other questions 
regarding regulation policy and the consequences in the bigger 
picture, and I am just going to get down to some practicalities 
and experiences in San Antonio and questions that constituents 
will pose. And I want some--your opinion on it. And of course, 
this question is more directed to Mr. Melcher.
    The tragic experience of the John family, of course, stands 
out. When a cable company comes--let us say when they approach 
the John family, are they notified that if you dial 911 that it 
is--there is not going to be a connection? I mean, I know you 
are going to get the recording, but that is after the fact. 
That is insanity. But is there any requirement--I can see that 
maybe there may be some sort of legal responsibility and 
liability and I guess you would have to see what the courts 
think, but beyond that?
    Mr. Melcher. It depends on the carrier, Congressman. The 
cable providers in Texas, at least, are doing full-borne 911, 
and so there is really no disclosure there required. The 
others, as in Mr. John's cause, got his service from one of the 
ISP type providers. And although if you sign up for it on their 
website, they have some disclaimer information that you have to 
accept and there is some fine line there between disclaimer 
equals real disclosure in our minds, from a consumer 
perspective, but in this case, he picked up the newspaper ad 
and dialed their 1-866 number and signed up for it over the 
phone. So there was no disclaimer, no disclosure, no nothing. 
They took his order. He got his service and didn't know he 
didn't have 911 until his daughter picked up the phone and 
needed it that day.
    Mr. Gonzalez. How about home security systems? I have been 
told by individuals that install these things that you need a 
wireline. In other words, what happens if you have a silent 
alarm or any type of alarm and it is triggered because you have 
an intruder or whatever it is, an alarm goes out, and what 
happens is the signal goes out by the wireline, the hard-line, 
and then to the center. The center then calls the home. If you 
are there, you answer and you give them the code word, if you 
can member it, and so on. But let us just say something is 
happening. It disables that system, doesn't it, if you have 
Voice-over IP?
    Mr. Melcher. Again, it depends on the technology. If it is 
a system that has no battery backup and the power is out, then 
it will not work. There are some of these IP technologies that 
don't support fax or TDD devices, telecommunications devices 
for deaf and hard of hearing persons, because they use FSK or 
other types of signaling. Some of the IP providers do. That 
technology is getting better, but your observation is very 
correct, sir. It depends on the type of technology, but some do 
not support that type of activity.
    Mr. Gonzalez. Again, is there any requirement anywhere that 
would--that the cable company that comes and has you switch 
over to advise the consumer that this disables their security 
system, or one aspect of it anyway, the most important?
    Mr. Melcher. There is no written regulation that we are 
aware of, sir, and we are totally relying on their voluntary 
compliance to those types of disclosures.
    Mr. Gonzalez. And that probably won't happen, right, 
because that may be a determinate factor for someone to not 
subscribe. Simply saying what do I have to do in order to make 
sure that my alarm system, which I spend so much every month 
and had so much to install, is going to work?
    Mr. Melcher. We launched a huge press conference and 
campaign yesterday in Texas that basically said buyer beware. 
You need to check out the technology that you are purchasing to 
make sure it is going to do all that you want to do, like 911--
enhanced 911 and those other types of issues. Will it do 
security? Will it do fax? The buyer needs to be aware and be 
educated as to what the limitations are of the service that 
they are purchasing.
    Mr. Gonzalez. What do you believe is the responsibility of 
the provider of Voice-over IP?
    Mr. Melcher. Well, as a public servant, it is my job to 
protect the public. And as public servants, all of us, our 
first and primary goal, I think, should be public safety. I 
understand the arguments and I understand the costs and I 
understand all of those arguments that you have heard, but the 
bottom line is we have people out there that think they are 
getting a different kind of ``phone service,'' and they expect 
that 911 is a part of that. Any degradation to fully enhanced 
911 is ridiculous, because it is not technically a barrier. 
There is no reason for them not to have that kind of service. 
It might be an economic issue and there might be some incumbent 
access issues, and those are all true issues, but there is no 
reason to offer a telecommunications service that doesn't have 
911 as part of your business plan.
    Mr. Gonzalez. Okay. And any of the other witnesses are free 
at this time, if they have an opinion regarding, not just 911 
but what I am eluding to, of course, is what happens when it 
disables alarm systems and consumers are not being advised.
    Mr. Rutledge?
    Mr. Rutledge. Our company provides the capability of using 
your alarm system with the Voice-over IP products we are 
installing. We have also installed E-911, and we are currently 
working on hearing impaired services, which we have not yet 
launched but plan to launch. And so we have been rolling out 
our product and adding additional features to it, as we develop 
the product and as technology gets integrated in such a way 
that it is practical to offer it to the marketplace. But I 
think we have a responsibility to tell all of our customers 
exactly what our service does and what it does not do. We have 
chosen to offer E-911, because we think it is good for our 
customers to have. It is good for us to provide it. We think 
there is an expectation in our marketplace that when you have a 
phone service that you are going to get that product from us. 
And so we voluntarily provide it, and we are trying to make all 
of the functionality that people are used to in what they 
consider their phone service to work on our network and then 
add much more to it so there is an even greater value than what 
was traditionally offered.
    Mr. Gonzalez. Is there additional cost when you provide 
this service, whether it is the 911 capability, but especially 
the security alarm systems?
    Mr. Rutledge. No, we have one flat fee no matter what, no 
matter how much you use it or where you call.
    Mr. Gonzalez. Thank you.
    Anyone else?
    Mr. Chairman, thank you very much.
    Mr. Upton. Mr. Bass.
    Mr. Bass. Thank you, Mr. Chairman.
    Mr. Shlanta, you mentioned that you needed adequate cost 
recovery for access to the data bases. Do you have any--could 
you give us any further details as to how that cost will be 
recovered and what it would be and how that would work?
    Mr. Shlanta. Well, I think that is part of the intercarrier 
compensation rates that need to be developed. The companies 
have spent millions of dollars developing the data bases, and 
as I indicated in my testimony, I will consider those data 
bases part of the network infrastructure. Any upgrade and 
maintenance of network infrastructure is--requires adequate 
cost recovery to ensure that those are done.
    Mr. Bass. Can--all right. So at present, States regulate 
911 access. We have pretty much agreed that the Federal 
Communications Commission should have sole jurisdiction over 
VoIP regulation. How does that all work? Maybe, Mr. Melcher, 
you could start. And who would decide--I would just like to 
know how that whole system would work.
    Mr. Melcher. Actually, we think that the Congress's 
intention to, you know, leave the industry somewhat unfettered 
so that it can grow, we don't have a problem with that. We do 
see a role for the Commission to play in the interim. There are 
some technological things that next generation access needs to 
have worked out. Our agency, along with NENA and several 
universities, are looking at those models, and that those 
solutions are coming very quickly.
    But access into the 911 system, I think does need to have 
some type of leadership, and the Commission has a docket open 
on that. And the commissioners that--I have spoken to all of 
the commissioners and the chairman, the outgoing chairman, and 
they have all expressed a willingness to take the 911 piece 
from that docket and accelerate it. And some interim rulemaking 
on that, I think, would be very helpful. I don't think it would 
be overly burdensome, because as you have heard today and 
before, most of the players are wanting to--even the ones that 
aren't doing it now, are wanting to, and they are working very 
aggressively toward integrating into 911. So I don't think you 
are going to get a whole lot of pushback on that. A little bit 
of interim rulemaking at the Commission would certainly suffice 
in the meantime while Congress deals with the rewrite of the 
act.
    Mr. Bass. So interim rulemaking, do you think the FCC could 
handle E-911 from VoIP just the same way they handle it for 
wireless?
    Mr. Melcher. I think they are at a better posture to handle 
it for VoIP than wireless. I think so many lessons have been 
learned in wireless 911 that I believe not only is the 
Commission better equipped to handle it, but I think the public 
safety community and the telecommunication industry is better 
equipped to handle 911.
    Mr. Bass. Anybody else have any other comments on that? If 
not, I will yield back.
    Mr. Upton. Mr. Boucher.
    Mr. Boucher. Well, thank you very much, Mr. Chairman.
    I have laryngitis today, and so I apologize for this raspy 
voice.
    I want to express appreciation to our panel for sharing 
their views with us on IP-enabled services and VoIP in 
particular. I have listened very attentively to what you have 
had to say, and I think you have offered some very helpful 
viewpoints.
    I have a couple of key questions. We have had one example 
to date that has been largely reported and some less well 
reported suggestions that other examples have occurred where 
broadband platform owners have engaged in a practice to disable 
access by their broadband customers to the websites of people 
who offer a competing service. The one example that was widely 
reported was a local exchange carrier engaging in port blocking 
to prevent its customers from accessing Vonage to enjoy VoIP 
service. And there are suggestions that this is not the only 
such incident. My concern is that if we don't have a clear rule 
that says you can't do this, if you are a broadband platform 
owner, we should have a rule, in my opinion, that says that you 
may not discriminate among the bits that are traveling across 
the platform you operate. And you certainly can't do it in a 
way that favors a content service that you offer to the 
disadvantage of a content service offered by a competitor that 
has a website somewhere out on the Internet.
    This rule would be very simple and would say that a 
platform owner may not disable access to any website on the web 
and particularly could not do that in order to engage in anti-
competitive conduct and favor its own service over the service 
offered by someone else. So in practical terms, the cable 
operator offering telephony could not disable access through 
its cable modem service to a VoIP provider, such as either of 
the gentlemen we have here today. A telephone company offering 
DSL service would have to play by exactly the same rules. And 
any other broadband provider would be required, in effect, to 
respect network neutrality.
    And this is a principle that was strongly endorsed by 
Commissioner Powell during his tenure as Chairman of the FCC, 
which ends very shortly. He decided not to translate that 
support for network neutrality into a Commission rule. I had 
hoped that he would do that. That has not been done as of now. 
We have the rewrite of the 1996 Act coming up, and we have an 
opportunity to insert this very common sense principle of 
network operation into the statute. I am inclined to do that, 
and I would welcome your views on whether or not that is a good 
idea.
    Let us start with Mr. Erickson and Mr. Grivner.
    Mr. Erickson. Sure. Well, obviously, as someone who 
requires unfettered access to those broadband, we strongly 
would endorse that. I would also take it a step further and 
would ask to separate it from the larger question of the 
Telecommunications Act rewrite. In my opinion, this is 
something we--as I mentioned in my testimony, we recently 
completed a consumer poll, and only 3 percent of consumers of 
the 2,000 we talked to, said that it was legitimate for a 
broadband provider to interfere in any way, disrupt any form of 
service application or content over a broadband pipe. So the--
you know, our constituents, all of us, our customers and your 
constituents clearly are in favor of aggressive action to 
ensure that, you know, that inference never happens.
    Mr. Boucher. Thank you very much.
    That was just a great answer, by the way.
    Mr. Grivner.
    Mr. Grivner. Congressman, I would agree with your proposal. 
If you look at the chart that Ms. Puckett was so kind to bring 
with her today, if you look at the bottom of that chart, that 
is where--I would argue that that is where you see more 
regulation. And then as you move up the chart, you see less 
regulation. So I think your proposal, as it hits the first two 
layers of that chart, does make a lot of sense.
    Mr. Boucher. Thank you very much.
    Others who would care to comment?
    Ms. Puckett?
    Ms. Puckett. Thank you very much. And I am glad I brought 
the chart, because I think it visually helps here. I don't 
disagree, but I think there are a few things that we need to 
clarify here. The bottom of the chart, the question is the 
chart, depending on the value proposition, let us just say like 
Vonage, who doesn't have facility base, they could be at the 
top of the chart, and the cable provider could be at the bottom 
of the chart, right. Who is accountable in between? It is not 
clear. I think clarity is what we need here. And I think we 
have to be careful with discriminating the difference of 
blocking and service degradation. Sometimes there is a very 
significant issue happening on the Internet with viruses, and 
service providers are impacted by viruses. And it impacts their 
ports, which appears to be blockage, and I want to get--I don't 
want to outrun my technical headlights here, okay, but I do 
know that we are--we, the industry, has had significant issues 
with the viruses and how it impacts ports----
    Mr. Boucher. Well, Ms. Puckett, let me interject. I don't 
think anyone would disagree that broadband operators have an 
obligation to conduct their platform operations in a way that 
promotes network security, and if security is the issue, then 
that is one thing. And obviously, managing the network with 
that objective in mind is fine. But to manage it in such a way 
as to disable access to a competitor's website because you 
don't want that company competing with you is wrong. You would 
agree with that, wouldn't you?
    Ms. Puckett. I would absolutely agree with that.
    Mr. Boucher. Great.
    Ms. Puckett. And I also would agree that you also need to 
be able to identify the traffic----
    Mr. Boucher. Right.
    Ms. Puckett. [continuing] and it needs to be clear on how 
you are compensating and what the arrangements are between the 
two parties.
    Mr. Boucher. That is great. Thanks.
    Mr. Melcher, I saw you nodding your head. I assume you 
agree with the proposal?
    Mr. Melcher. I do, because, you know, blocking another 
provider's content can be equated sometimes to blocking access 
to our facilities as well. And although it is IP to IP in the 
model that you put out there, ours could also be IP to IP. And 
as those of us who are more aggressive in building these next 
generation platforms, that would be a significant issue for us, 
and we appreciate your recognition.
    Mr. Boucher. Mr. Rutledge, surely the cable industry would 
agree this is a good principle?
    Mr. Rutledge. I don't think there is any example of any 
cable operator blocking sites on broadband networks. In fact, 
our whole opportunity as a broadband operator and the networks 
we have built is to sell more subscriptions. And when people 
buy subscriptions to our service, they get access to sites. And 
we actually like the fact that sites are getting richer. And 
the fact that sites are richer requires more broadband 
capability. And because our networks, we think, are superior to 
our competitors, that gives us a marketplace opportunity to 
succeed. So I don't think, from our point of view, we see a 
problem. And--but our networks are, in essence, open.
    Mr. Boucher. Well, let me just add that--and again, we are 
talking about rumor here more than anything else, because I 
don't have a solid report of this. But I read in one of the 
communications publications that circulates around the Hill on 
a daily basis just yesterday that there now is a suggestion 
that a cable company has, in fact, engaged in port blocking 
with respect to an independent provider of a competing service. 
So I am not saying that is necessarily true, but the rumor is 
certainly out there, and I suspect we are going to find out 
more about that in the days to come.
    Let me give the final witness, Mr. Shlanta, an opportunity 
to comment, if you would like.
    Mr. Shlanta. Certainly. I guess I don't agree that we need 
separate legislation regarding the port blocking. I think it is 
all part of the intercarrier compensation discussion. I don't 
think that the----
    Mr. Boucher. So you pay to get access, and if you don't 
pay, you can be blocked? Is that what you are saying?
    Mr. Shlanta. No, I think what you had said was there are 
some rumored reports of, perhaps, a cable company----
    Mr. Boucher. No. No. Well, no, we have a firm report that a 
local exchange carrier did in fact block access to Vonage. Now 
that is clear. And the FCC did undertake a proceeding with 
respect to that particular instance. What we do not know for 
certain is if there are other examples of that, although we are 
hearing through the grapevine and through some reports that 
unidentified broadband operators have, in fact, engaged in this 
practice. My concern is if we don't have a rule that says you 
can't do this, and it is a pretty simple rule, and I think most 
people with common sense would agree that it is appropriate, we 
are going to see more examples.
    Mr. Chairman, I know my time is up, and I appreciate your 
patience. Thank you very much.
    Mr. Upton. Thank you.
    Mr. Barton.
    Chairman Barton. Thank you, Mr. Chairman.
    My questions are not quite as technical intense as Mr. 
Boucher's. He is our resident intellectual telecommunications 
expert. I am just one of the laymen on the committee, but I am 
the chairman, so that helps a little bit.
    My first is more of a comment than a question. I hate this 
acronym of VoIP. Nobody knows what VoIP is, and you know, it is 
like some character in Star Wars or something. I have come up 
with a different acronym, and I just want to try it on you 
folks and see what you think about it. I have tried it on Ed 
Markey. He doesn't like it, but that might mean it is a good 
thing, I don't know.
    Mr. Upton. I liked it. I want you to know I liked it.
    Chairman Barton. Yeah. Well, Mr. Upton likes it.
    How about BIT or BITS for Broadband Internet 
Telecommunication Services, because VoIP is really voice. We 
are really talking about broadband and Internet and 
telecommunications. So if--I may start using BIT or BITS if you 
folks would start using it, too.
    Mr. Melcher. I will take some of that.
    Chairman Barton. You like that?
    Mr. Melcher. Sure.
    Chairman Barton. I mean, if you don't like BIT or BITS, 
come up with something you do like, because VoIP--I would hate 
to, 20 years from now, having to be doing a town meeting, if I 
am still in Congress, talking about VoIP. But BIT, because you 
have got data bit, it just seems a little bit better.
    So anyway, that is a food for thought. Boucher is over 
there grinning about that.
    First, as a general question, in the Internet age, with 
everything you folks are doing, is there a Federal requirement 
for a statute that requires universal service? If you were me, 
would you, in the telecommunication rewrite that we are about 
to do, would you repeal the universal service requirement?
    Mr. Grivner. I will start.
    I would reform it. I wouldn't repeal it, and I would make 
it applicable to all, not just some. I think it----
    Chairman Barton. When you say make it applicable to all, do 
you mean everybody at this table?
    Mr. Grivner. Everybody at this table, and some that aren't 
even here.
    Chairman Barton. Including our cable representative?
    Mr. Grivner. Well, yes, I would say that. Obviously, he is 
going to say no. But yes, applicable to everyone at all--and 
equally, that way--because, as you said with your term, I agree 
with you on VoIP it is actually like when people converted from 
radio to television and they looked very much on television the 
first time like they were on the radio. And that is what VoIP 
is. It is kind of a--the first application to move over, and I 
think it is going to become a very old term very quickly.
    And so I do agree. I think that universal service needs to 
be reformed, applicable to all. I think that you can look at 
some creative ideas that take some of the fund and, as we 
talked about enhanced 911, carve out some of the fund to do 
some research and development on enhanced 911 services for the 
future of telecommunications, not looking back on how----
    Chairman Barton. Is there anybody on the panel that would 
vote to repeal it? Most of you are providing services that 
don't benefit from a universal service requirement.
    Mr. Erickson. We understand this important public policy 
goal. I think I would agree with the people on the panel who 
said that is important to broaden the rate base. I think from a 
consumer standpoint, it gets a little complicated because, as 
we have done with our services and, you know, cable companies 
have done with theirs, what consumers like is to buy a package 
of services, and these services are to get converged together. 
And so you end up paying, you know, $90 for something that 
includes content services and voice services and other forms of 
communication service. So it gets a little hard to sort of 
parcel the revenue, if you will, to say, ``Well, this portion 
of the revenue or service is subject to those kind of 
subsidies.'' But I think overall----
    Chairman Barton. Well, overall, we have established that 
everybody is for universal service, so that means you all want 
to help pay for it, is that right, not just the current phone 
companies but all of you, Mr. Sun down there, and the lady 
here, you are all going to willingly pay something into the 
Universal Service Fund?
    Mr. Grivner. Well, I am already paying close to $100 
million a year, 11 percent of my revenue, so the way I look at 
it, I will probably end up paying less.
    Chairman Barton. Okay. My cable man wanted to say 
something, I think.
    Mr. Rutledge. I wanted to say that, you know, it is in our 
interest for our voice customers to be able to complete their 
call to someone in a rural area, so there is value in that for 
us as a company. I do think the definition of what the service 
of universal service is needs to be updated. I think the 
concept arose in an era of wireline telephony, and the real 
question is what do we want to provide the people universally 
and then what ways can you do it. And those are very 
complicated questions that I think need to be addressed. That 
done properly I think----
    Chairman Barton. This committee doesn't do anything unless 
it does it properly. That is the stipulation. So----
    Mr. Rutledge. And--well, I assumed that.
    Chairman Barton. We may need your help to determine what 
proper is.
    Mr. Rutledge. Yes. But that, you know, that said, then I 
think we need--then it needs to be funded, and we are willing 
to work on a mechanism to do that.
    Chairman Barton. Well, my time is expired, Mr. Chairman. I 
am semi-serious about BITS. That may not be the perfect one, 
but please help us come up with something different than VoIP. 
And I chose BITS because of the Internet telecommunication 
services, and it is, you know, broadband, technically speaking, 
would include everything including wireless broadband.
    Thank you, Mr. Chairman.
    Mr. Upton. Thank you.
    Ms. Blackburn.
    Ms. Blackburn. Thank you, Mr. Chairman.
    And I want to say thank you to each of you, and I know we 
have run in and out of here today with meetings and votes, and 
thank you for your patience. We appreciate that. And we are 
always as absent as we appear. Sometimes we are in the back 
holding meetings.
    You know, the chairman has got a great point there talking 
about BITS. And I think it is going to get even more difficult 
for us. You know, we talk about Voice-over IP, or VoIP as he is 
saying, but now really it is everything over IP, as one of our 
witnesses at a hearing said last week, and I don't know how we 
would take those three vowels and one consonant and come up 
with some kind of term that we could even begin to pronounce.
    I do have just a couple of questions that I want to follow 
up with you all on. I want to--let us talk about the Federal-
State interface for just a few minutes on this. I want to be 
sure everybody on this witness panel concurs that Voice-over IP 
is an interstate commerce issue, it is an interstate issue. Is 
there--am I reading your testimonies and hearing your comments 
to come to the conclusion that you all agree it is an 
interstate issue?
    Mr. Grivner. Well, a clarifying point. As I said earlier, I 
think that the terms that we have used in the past describe 
communication services, inter, intra, international, or local I 
think are not useable in this context. It is basically a 
service that I could call across the room, across town, across 
the world and using that kind of service. So in many cases, we 
are applying a previous thought process to a new kind of 
service. So while I agree with your premise that the FCC needs 
to rule over that from an interstate perspective, again, I 
think that is a term that is becoming--has seen its better 
days.
    Ms. Blackburn. Thank you, sir.
    Mr. Erickson, you had stated that States should have an 
active role in fostering competition and protecting their 
citizens. And I want you to elaborate for just one moment, if 
you will, on what that role should be.
    Mr. Erickson. Historically, obviously, the States have 
always participated in Federal proceedings, and I am just 
suggesting that they continue to do so, that we will cooperate 
as best we can and work together to try to create with the 
States' participation a common national framework for things 
that do require action and involvement of State authorities.
    Ms. Blackburn. Okay. All right. As we look at the Voice-
over IP, which is where we are right now, and consider the 
implications of convergence as we move forward, and we know 
that with Voice-over IP, a customer gets their voice 
application from one provider, like SunRocket and they get the 
broadband facilities from something like Cablevision or 
CenturyTel, and there exists the possibility of some extended 
service outages where both companies blame the other, and the 
customer is--will feel powerless. And this is going to be one 
of those customer services issues that we know we are going to 
get calls about. And it is going to be left for somebody to 
handle.
    So looking forward, who should sort out these sort of 
service outages? Where should the responsibility lie? Should 
that be State commissions? Should it be the FCC? Should it be 
the courts? Should it just be left to the markets to the 
competition getting into the market? Where should the 
responsibility on that lie?
    Mr. Grivner. Well, in actuality we have that problem today, 
because, for example, in my case, XO Communications, we provide 
service to business customers but in many cases, that last mile 
of connectivity is provided by a regional Bell operating 
company. But the customer looks to us as that primary interface 
and will keep their service with us or take it away based on 
their overall performance of being able to manage our, in this 
case, subcontractors. So in our case, I think it belongs to the 
primary provider. And in many cases, it would go back to a 
State jurisdiction in terms of complaints or issues with 
service with XO on a local basis.
    Ms. Blackburn. Okay. Thank you. My time is expired. Thank 
you.
    Mr. Upton. We recognize Mr. Stearns.
    Mr. Stearns. Thank you, Mr. Chairman.
    I don't know if this question has come up with portability 
of numbers. I think--do any of the witnesses disagree that the 
number of portability should be available for VoIP customers? 
Let me just start from my left to right.
    Mr. Grivner. It absolutely is essential for our customers.
    Mr. Shlanta. Agree.
    Mr. Stearns. Anybody disagree?
    Okay. Mr. Grivner, it seems from your testimony that you 
want to continue for IP services the same kind of unbundled 
access regime that you enjoy for telecommunications services.
    Mr. Grivner. That is correct.
    Mr. Stearns. One of the benefits of VoIP services is that 
it rides a broadband pipe without requiring the VoIP provided 
to need unbundled access to the last mile facilities. Given 
that, why should Congress perpetuate an unbundled access regime 
in an Internet Protocol world?
    Mr. Grivner. First of all, Congressman, IP is software that 
rides on some sort of physical asset. That physical asset to 
the customer, that last mile of connectivity is still 
controlled by a few companies, primarily the Bell operating 
companies, or in some cases, the cable companies, but not so 
much as it relates to business customers. So that last piece of 
copper, that last piece of fiber is still going to be a 
bottleneck, regardless of the service that rides on top of it, 
whether it is VoIP or BITS. That service is still going to be 
bottlenecked by that last piece of copper or fiber to the 
customer. That is not going to change regardless, because 
economically, there are issues with building, going into 
buildings, digging up streets to continue to build to that last 
mile of connectivity, so that is not going to change in the 
foreseeable future. It will at some point when wireless 
broadband becomes available, but that is not in the foreseeable 
future.
    Mr. Stearns. Anyone else?
    And also, Mr. Grivner, this broadband wireless offering you 
have, in my--I represent part of Jacksonville, Florida, and 
Clear Wire is being deployed in Jacksonville, which I 
understand has just begun to offer VoIP. Maybe if you could 
just explain a little bit about what you are offering.
    Mr. Grivner. What we are offering--we purchased some 
spectrum several years ago for about $1 billion. It is called 
LMDS. It is fixed wireless spectrum, so it is a licenses 
spectrum. And what we are offering in San Diego, Los Angeles, 
Dallas, and very soon in Florida, most of the State of Florida, 
is a fixed wireless capability. In California right now and in 
Dallas, we are offering that as a direct solution to end-user 
customers. And basically, it eliminates that last mile of 
copper or fiber to those customers. What we are doing or 
potentially going to do in Florida here in the next 5 to 6 
months is working with a cellular provider using that 
capability to back-haul their wireless from their wireless 
towers to central offices.
    So that capability exists in other countries. If you look 
at Europe or Asia, they have deployed it quite heavily. One of 
the reasons is that when you don't have a competitive 
environment, like you do in the United States, a lot of the 
pricing is artificially high, so therefore it has been very 
easy for wireless broadband providers to come into those 
markets and deploy those technologies. That technology in the 
United States I think is only years away as the prices of that 
technology continue to decline. So I think it is going to be an 
option. Clear Wire was founded by Craig McConnell, who also 
founded XO many years ago. I think he has got a very good idea. 
I think it is a very innovative idea to provide wireless 
broadband to residential and potentially businesses at some 
point in time, and I think that dream will become a reality 
within 3 to 5 years.
    Mr. Stearns. For the--not just the commercial market but 
for the----
    Mr. Grivner. Consumer.
    Mr. Stearns. [continuing] consumer, too?
    Mr. Grivner. Yes.
    Mr. Stearns. Well, that is--you know, Clear Wire probably 
is on, just as you are, probably the leading edge of a new 
concept here. And this fixed wire is something that anybody can 
get into or is it confined to if you have the money you can get 
into it?
    Mr. Grivner. I think you need money one way or another, 
because----
    Mr. Stearns. One way or the other.
    Mr. Grivner. [continuing] you will have to pay for the 
electronics, and there is still a price associated with 
building the towers. I think the bottleneck that we will all 
run into at some point in time, potentially, it is kind of 
interesting, we will move from this copper bottleneck to the 
building owners that have the rooftop rights where we have got 
to put cell sites up or something along those lines. But that 
technology is going to continue evolve. It is coming from 
companies like Hughes and Erickson and companies in the Far 
East, and the prices are getting less and less. So I do think 
it will become available, and I think when we talk about the 
wireline connection, I think it will go away or certainly not 
be as much of an issue in 5 years or something. And then when 
you look at the rural community, I think that is going to be a 
great solution for broadband capabilities to rural communities 
as well.
    Mr. Stearns. Good point.
    Thank you, Mr. Chairman. My time is expired.
    Mr. Upton. Mr. Inslee.
    Mr. Inslee. Thank you, Mr. Chairman.
    I have enjoyed listening to your comments. I want to ask--I 
am a new member of the committee, so I am the one that needs 
some educating here. I want to ask you generally, you have been 
talking about all of these multiple regulatory issues and 
consistency or lack thereof amongst various providers of what 
are becoming similar bits across these channels.
    I just wonder if any of you could offer sort of a unified 
theory of regulation on these multiple issues. You know, we are 
facing it from universal service, must-carry provisions, 911 
issues. We have all of these issues of sort of a confluence of 
multiple sources, not just Voice-over the Internet, and I just 
wanted to know if any of you, in your own minds, can think of 
how we should look at these issues of how to--where we have 
distinguished or unique regulation and where they should all be 
consistent, because we are, obviously, having this unification 
of multiple channels. We talked about, you know, video over 
cable, Internet, previously voice-only lines. Many of us think 
that all of this will be in one oatmeal mix in 10 years. I just 
wondered if any of you can give us some thoughts how you would 
encourage us to look at these multiple issues about where they 
need to be consistent and where they need to be unique to one 
channel or the other. It is a broad question, but anyone who 
wants to take a stab it, I would be interested.
    Ms. Puckett. I will try first.
    I am Karen Puckett, CenturyTel, and I don't know if this 
will exactly address the comprehensiveness that you are looking 
for.
    But first, I think we ought to stand back and make sure 
that we put the customer first, and in all of this discussion, 
you know, we are renaming VoIP and I am guilty of using VoIP 
here, but at the end of the day, what it is about is the 
solution to the customer and the marketplace at what price 
point. And we all have to get our value propositions around 
that. We can do VoIP-like service today without IP. So the 
point is we have got to ensure that we put the customers first. 
We have, you know, FCC oversight as well as State. No one, 
holistically, is looking at the impact on the customer. We 
might have, excuse me, a State movement on a rate and maybe a 
Federal slick happen close to the same time. To the end user, 
and especially to our consumers in rural America, they only 
have so many checks in the checkbook. It is a price increase. I 
don't care if you call it a slick or a surcharge or what, it is 
a price increase. So I would clearly encourage us to look at 
this from a customer's perspective for a second.
    And then the third area would be around not the technology 
but the services and like services should be regulated like. 
And you know, competition is actually very good for all of us. 
It makes us stronger companies, but you have to have parity.
    And those are the three or four areas I give you as kind of 
principles.
    Mr. Inslee. So when--just to dovetail what you said, what 
do you--I mean, that is an obvious great sound byte, which is 
like services should be treated like, but should we look at 
like services from like to the consumer or like to the 
technology or like to the expense to the industry? In other 
words, what is really the salient likeness which should have 
particular techniques all in the same regulatory----
    Ms. Puckett. Well, I think ultimately if you go back to 
putting the customer first and keeping the forefront as from a 
customer's perspective, I mean, today a lot of customers don't 
purchase, and especially the younger generation, wireline 
services. They have wireless. So substitution. So we need to 
think more from the mindset of our consumers, so I would look 
at it from a consumer standpoint, sir.
    Mr. Inslee. Any other thoughts?
    Mr. Rutledge. Yeah, I think that I would agree with most of 
the--that comment. The service and the services perceived by 
the consumer I think is the most significant aspect in terms of 
what you want to do from a public policy perspective. IP is 
just a format of digital. And you know, there are other IP--
there are other digital formats out there. For instance, our 
digital television is in a format called M-Peg. And one isn't 
superior to the other. They are different technologies, and if 
you get hung up on the protocol as opposed to the service, I 
think you miss the main point, which is what are consumers 
getting, how does it--what is the service that they are 
actually being provided, and what is the public policy 
implication for those services?
    Mr. Melcher. There is also the expectation of, you know, 
independent of the technology, it is still a communication 
service. So the expectation for things like 911 should be built 
in. But there is another piece of this that, as Federal 
preemption comes in more in the Internet telephony market, 
there is a significant impact. And this is not good, bad, or 
indifferent. It just is what it is. Our funds right now come 
from a local level that our State legislatures enabled us to 
put a fee on the phone line. And again, we are back to, you 
know, what is like. If that moves away, as more of these 
customers move from the wireline carriers to some other 
technology, if those technologies are overseen by the Federal 
Government, then we are going to have to have some mechanism 
there to recover our revenue stream or we won't be able to 
provide service. So my recommendation is not to have it at the 
State level or at the Federal level. My recommendation is that 
as you look at rewriting these acts, you take that into 
account. Because if we can't get it from State-authorized 
funding sources, we are going to have to have it from federally 
authorized funding sources.
    Mr. Inslee. I got you. Some of you may have talked about 
privacy issues. I haven't been able to hear the whole hearing, 
but I just would be interested in any thoughts you have about 
privacy issues broadly stated as we move forward to this brave 
new world. You know, we are all looking at the choice point 
issues right now. We have been involved in the spyware issue 
that has peripheral interest in privacy. Do you have any 
thoughts on what we ought to be thinking about privacy-wise in 
the immediate future? Any concerns, worries, advice?
    Mr. Melcher. Because in the 911 arena, when you dial those 
digits you give up the right to privacy because you want to be 
located. However, it has to stop right there. If you make an IP 
telephony call and it goes to, let us say, a next generation 
piece app that is capable of doing it without going over the 
public switch network, the consumer's right to privacy ends 
right there at that piece app. And the fact that they called 
911 and any of the data associated with it, which will be more 
rich data, as the technology improves, must be protected. The 
consumer must have their interests protected.
    Mr. Grivner. Our IP traffic today that we carry is 
encrypted and it is part of a built-in capability. It doesn't 
mean it can't be broken, but it is encrypted. And you know, 
that capability has to continue to be enhanced over time, 
because there are people spending 24 hours a day trying to 
figure out how to break into it. But at a minimum, that service 
has to be encrypted between the callers.
    Mr. Inslee. And is that--should that be a matter of Federal 
regulation to define that encryption standard?
    Mr. Grivner. It should be a matter of common sense, but if 
that is the way it is done, yes, I think that it should be 
encrypted no matter what. I just think it is--it would not be 
a--it is not a good decision otherwise not to send that traffic 
so that anybody could tap into it without the proper legal 
ability to do so.
    Mr. Rutledge. I would just add, there are privacy 
obligations on different industries and different levels of 
responsibility. The cable industry has a long-standing privacy 
obligation, which is extended to each of the services that it 
has launched as technology has allowed us to build new 
products. And so there is a higher degree of obligation on the 
part of our business than others. And so I think there is some 
standardization needed in our review of the various components 
of these historic different industries.
    Mr. Inslee. So should a VoIP carrier be able to seize the 
two people talking use the word ``surfboard'' in their 
conversation and notify a marketing based agency that these two 
people are talking about surfboards and maybe should get a pop-
up ad in--somewhere in their other system. Should that be 
allowed? Should that be a matter of definition of the consumer 
or should Federal regulations handle that?
    Mr. Erickson. I think, my opinion is outside of the law 
enforcement requirements, how people communicate is private and 
should remain that way. And we, as Internet phone service 
providers, should not have any ability to eavesdrop or 
manipulate or capitalize on those conversations.
    Mr. Grivner. I agree.
    Mr. Inslee. Thank you, Mr. Chairman.
    Mr. Upton. Mr. Radanovich.
    Mr. Radanovich. Thank you, Mr. Chairman.
    There was a discussion about 911 not being available to 
some subscribers and some discussion about the fact that there 
is no public warning. In any telecommunications act that we do 
this year, would this panel be in favor of making it mandatory 
for all providers or for some just providing news to their 
customers that they don't provide it?
    Mr. Melcher. I think the public expectation is if you are 
buying a service that is telecommunication-like, that it is 
incumbent upon the carrier to provide enhanced 911, not just 
the ability to dial and redirect your call to some 
administrative line, but fully enhanced 911 as they have come 
to believe it exists today. We have done so much public 
education during the wireless years when we were trying to 
solve wireless 911 that the public expectation is out there. We 
have done a good PR job. I don't see us able to back away from 
it any time soon.
    Mr. Radanovich. Yeah, and I would guess that, for the sake 
of time, that is the view of pretty much the entire panel or--
yeah. Okay. Thank you.
    Now on--still on the issue of 911, though, it was mentioned 
that for the carriers that do provide it, that there is a 
certain amount of investment in--developed into the system, 
which--and you should be compensated I think once--if it is 
made mandatory that others should have access to that 
information. But can you tell me, did you really pay for it or 
was--is this something that is included on the telephone bills, 
and can the argument be made that the consumers really paid for 
that service? Maybe Ms. Puckett or Mr. Melcher?
    Ms. Puckett. There are some--and I will let Mr. Melcher 
talk about the surcharges and how--but typically that is for 
the county sides to have their equipment reimbursed. There are 
a significant, what I call, back office investments. When you 
provision a customer, you have to ensure that that data base 
is--that number is properly put over to the data base and that 
data base is then communicated properly to the piece app. I 
think the other concern that needs to be focused on is, as you 
think about portability, as a wireline customer, we may have 
that customer today. They may port their number to wireless or 
to a VoIP provider. We can't track it then. I think the whole 
portability issue is a big concern with 911.
    Mr. Melcher. There are some built-in and institutionalized 
things that you do when you become a service provider. And in 
the competitive open exchange carrier model, you had to plug in 
three places. You had to plug in to the local access tandem, 
which was usually run by the incumbent carrier. You had to plug 
into an interexchange carrier tandem for long distance service, 
or several interexchange carrier tandems, and you had to plug 
into the 911 tandem. But the only one that you got any money 
back for was plugging into the 911 tandem because of the model 
we built with the incumbent exchange carrier who runs the 911 
system that they got paid for those circuits.
    I think there are some fundamental flaws, new technologies 
come in that model. Perhaps the cost of doing business says I 
do connect to whatever it is, IP or whatever. I do connect to 
the 911 routing system, and I do upload my records. Now should 
I be compensated for maintenance of the records and the 
accuracy and all of those? I think that is a very good 
argument. But I might fire SBC from my selective routing 
function and hire Mr. Grivner's company to come in and do some 
IP-based routing function and then that way Ms. Puckett and Mr. 
Rutledge and everybody else is going to trunk to or somehow 
connect to my new routing infrastructure that is capable of 
next generation IP and everything else, but it is going to be 
away from that incumbent model that we are so chained by today.
    Mr. Radanovich. All right. Thank you.
    One last question on the issue of universal coverage. Is it 
really more just an issue of shared cost that the argument is 
or is it more the issue of shared regulatory burden for this?
    Ms. Puckett. Everyone on this panel benefits from universal 
service, because either legacy communication products and 
services or the IP still requires the underlying 
telecommunications infrastructure. And we all have to connect 
be it to VoIP providers, cable providers, we all don't have 
private networks. We use the public network, and that is very 
much about what USF is about to ensure that there is that 
interconnection in those networks in and out of rural America 
to these public networks.
    Mr. Radanovich. Um-hum. Still I--you know, and you have to 
understand, this chart that you brought to clarify everything 
didn't clarify anything for me, so you know where I am coming 
from.
    Ms. Puckett. Okay.
    Mr. Radanovich. But I--but the issue is, as--the way I see 
it, and most of what I have heard on universal coverage, is 
that everybody who provides telecommunication services should 
be provided to make sure that these services are provided to 
everybody----
    Ms. Puckett. Correct.
    Mr. Radanovich. [continuing] and I represent a very rural 
District in California, so, you know, I fully endorse the 
concept. How much of this is regulatory, though, and how much 
of it is money, the issue of universal coverage? Am I speaking 
English here or----
    Ms. Puckett. It is about having the capability in rural 
America, in my opinion, so it is about consumers having 
access----
    Mr. Radanovich. Right.
    Ms. Puckett. [continuing] to communication services.
    Mr. Radanovich. Right. But is this more a--is it more an 
issue of having those people that are not paying for universal 
coverage and providing service now start paying in or is there 
a regulatory component to this that I don't----
    Ms. Puckett. Well, they benefit. For those who aren't 
paying in, they still benefit today because of the public 
network. There are tradeoffs.
    Mr. Radanovich. I am just asking you, as--in business, are 
you more worried about making sure that everybody pays their 
fair share for telecommunication service or are there 
additional regulatory issues that come along with making sure 
that everybody has universal care?
    Mr. Grivner. Everybody pays their fair share. That is the 
issue.
    Mr. Radanovich. That is the main issue? It is money rather 
than----
    Mr. Grivner. Well, everybody pays their fair share.
    Mr. Radanovich. [continuing] regulatory?
    Mr. Grivner. No one--I mean, there are probably questions 
about how the fund is used, but the first step is everybody 
pays their fair share.
    Mr. Radanovich. Okay. Great. That is----
    Mr. Melcher. That allows us to take these new technologies 
and get them into areas that didn't exist before.
    Ms. Puckett. And at the end of the day, it is about the 
consumer.
    Mr. Radanovich. No, I agree with you 100 percent. I am just 
trying to figure out whether your concerns are the fair share 
component of this thing as far as money goes or spreading the 
regulatory burden as well. Maybe I--it is also a regulatory 
burden component to that----
    Ms. Puckett. Well, there is certainly a regulatory burden, 
but I would still say the fundamental issue here is the 
consumer.
    Mr. Radanovich. Is the consumer?
    Ms. Puckett. Yes.
    Mr. Radanovich. But it is--for you, it is for the fair 
share of the dollar contribution to the universal----
    Ms. Puckett. The consumer.
    Mr. Radanovich. Well, I know that, but I am trying to get 
your perspective on this.
    Thank you very much.
    Ms. Puckett. Thank you.
    Mr. Upton. Mr. Pickering.
    Mr. Pickering. Thank you, Mr. Chairman.
    One of the things that I wanted to talk about, as we look 
at the current environment with the mergers with SBC and 
Verizon, an enterprise market in which Mr. Grivner and Mr. 
Erickson are trying to compete, you could have a situation if 
access to the network is not maintained for the bottleneck 
facilities, then that additional competitive option or choice 
could be lost and it could result in going back to a duopoly at 
best with enterprise, possibly a duopoly and residential voice 
between cable and the Bell companies. And I think that history 
has shown us that whenever we have a monopoly or a duopoly you 
do not have the investment or the innovation or the choice or 
the competition.
    So it is very critical at this juncture that as we do IP 
reform and telecom reform that we make sure that, just as Mr. 
Boucher was talking about access to content, which creates the 
greatest amount of competitive choice for individuals, that we 
also maintain access to networks so that we have the greatest 
amount of competitive choice and the greatest investment and 
the greatest innovation.
    Mr. Erickson, Mr. Grivner, have you all looked at Mr. 
Boucher's and Mr. Stearn's bill? Is it--as I interpret it, it 
would effectively remove all access to the Bell network for 
CLECs. Is that how you would interpret it? And what would the 
result be if that language were adopted?
    Mr. Grivner. Well, the result would not be good, because no 
matter whether we provide IP services and all of the switching 
and everything else, as you well know, that last mile 
connectivity is and still will remain a bottleneck. That is, I 
think, one of the appeals of your bill is that--I think it 
addresses the heart of the issue. You are looking for people to 
invest, facilities-based carriers to invest. That could only go 
to a certain point, and that last point is that last mile of 
connectivity. And I think that is an important part of this 
discussion that is not going to change. You aren't going to see 
a lot of investments where people are going to be digging up 
the streets and putting in new fiber into buildings. That is 
just not going to happen. So I think that is an important 
discussion that needs to occur.
    Mr. Pickering. Would you say if you don't have access to a 
bottleneck facility you--access to content is moot?
    Mr. Grivner. It is. You are absolutely 100 percent correct. 
And I also agree with your other points relative to innovation, 
competitive pricing, and the things that have been achieved 
over the last 8 years we don't want to see lost as a result of 
what has occurred over the last couple of months.
    Mr. Pickering. Mr. Rutledge, from cable's perspective, how 
do you--access to networks, interconnection and 
interoperability?
    Mr. Rutledge. Well, we certainly are very interested in 
being able to interconnect with the public switch network and 
think that we need to be able to continue to do that. We are 
right now doing it through a CLEC process, which is the 
existing regulatory structure. And we think there may be, you 
know, an obligation--or an opportunity to create rights for 
VoIP providers that might accomplish the same thing.
    We are concerned about these mergers in suppliers, people 
that we buy services from, long distance services, for 
instance, for our customers going away. But one other comment 
about--in the enterprise area, we have launched our broadband 
services and our Voice-over IP services primarily to 
residential customers, but we are ready now to expand into the 
enterprise area in a rapid way, and technology has come along 
in such a way that I think we will be able to provide very low-
cost communication services to businesses in ways that they 
have never experienced from a price position.
    But I don't think it is just a duopoly. There are wireless 
providers, and multiple wireless providers, in most markets. So 
when I look at the facilities-based competitive landscape, it 
is a very competitive arena, not just physical wireline 
competitors, but multiple wireless competitors, and new 
wireless entrants coming.
    Mr. Pickering. But in the enterprise market, you would say 
today, cable is not an enterprise market, wireless is not an 
enterprise market. You have some CLECs in the enterprise 
market----
    Mr. Rutledge. Yes.
    Mr. Pickering. [continuing] and so to be able to--an 
enterprise market not to go to a duopoly, you would need to 
maintain some access to bottleneck facilities, under the--and 
again, over time we can transition away from that, under the 
impairment standard. But today, we--if we have bottleneck 
facilities, a continuation of access to those networks is 
critical to have a--not a duopoly but multiple choices.
    Mr. Rutledge. Well, I am, when I try to reach a business 
customer, I am building a facility to their place.
    Mr. Pickering. But you have not done so yet?
    Mr. Rutledge. Well, I have, yes. And we have a CLEC 
business, and we have 40,000 or so business-class customers on 
our data network, which most people think of it as a 
traditional cable system. And I think that there is a huge 
opportunity to expand that now that we have a Voice-over IP 
product to go with the data product.
    So the facilities are there, but designing products that 
can reach the business marketplace has been, you know, 
heretofore, not really accomplished, but I think we are on the 
verge of having a rich array of products for the business class 
market because of VoIP technology. And again, that is cost 
structure. And so I think you are going to see a lot more 
competition, facilities-based competition almost immediately in 
that area.
    Mr. Pickering. Ms. Puckett.
    Ms. Puckett. I would just add one thing. We have just 
purchased--we are in the process of closing on a part of KMC, 
which is a CLEC that we are--a lot of metro access rings 
outside of our franchise but near our franchise. And my point 
being is that knowing the ruling was going to change and such, 
we still move forward, because it is very much like facility-
based. So we will go in and provide facilities. We don't think 
about reselling necessarily. That is not our model. So I think 
that is an important way to look at that, too.
    Mr. Pickering. Would any--under your model, your business 
plan, would you still need access to any of the Bell networks?
    Ms. Puckett. The company that we are purchasing 16 of these 
markets have some access, and that is important, but basically, 
we are going to go ahead and build facilities to those 
buildings and transition the ones off that aren't profitable 
over time. So we--our business model is very much about a 
facility-based----
    Mr. Pickering. Thank you very much.
    Mr. Upton. Thank you, Mr. Pickering.
    I want to say just in conclusion of the hearing, we 
appreciate all of your testimony, that is for sure. And it was 
nice, Mr. Melcher, for you to bring Reverend and Mrs. John with 
us. I have to say, as I look at the good history of this 
committee, the legislation that we have enacted into law, it is 
often those personal examples that drive each and every one of 
us. One of the highlights in the last session was the enactment 
of the E-911 legislation. As we held the hearings and went 
through the markup stage, members on both sides of the aisle 
recanted their calls that we have all made to 911, trying to 
help someone, not necessarily someone in our own family but 
some accident on the road that we have seen as we travel many 
tens of thousands of miles each year in our Districts and in 
our States. And that--those experiences drove every member to 
pass that legislation, I think on a unanimous basis, but maybe 
we have got a certain member from Texas who likes to vote no. 
Maybe he didn't vote for it, not a member of this committee.
    But in any case, it happened. And when we had our earlier 
hearing related to this issue, the updating of the Telecom Act 
of 1996, I think it was Mr. Shimkus who raised the case of 
Reverend and Mrs. John. I have not seen the story until he 
talked about it. It was later on in USA Today and as we update 
the telecom laws, whether it is making sure that there is a 
link to 911, obviously universal service, which this committee 
focused a lot of attention on today, all of those different 
things relate to our Districts and where members are, and it is 
one of the reasons why, for the most part, almost without 
exception, we have been able to pass legislation out of this 
subcommittee and full committee, no matter who has held the 
gavel, on a bipartisan basis.
    And we appreciate your thoughtful testimony, and it will 
certainly be taken into account as we begin the big process, 
the heavy lifting in a few months of actually putting a bill 
together as we look at this. And maybe VoIP will be a term of 
old and BITS will be the term of the future.
    God bless all of you. Thank you again for your testimony. 
The hearing is now adjourned.
    [Whereupon, at 1:47 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]

Response for the Record by Thomas M. Rutledge, Chief Operating Officer 
                      of Cablevision Systems Corp.

           FOLLOW-UP QUESTIONS FROM THE HONORABLE FRED UPTON

    Question: Do you believe that the pool of contributors to universal 
service should not be expanded to include broadband and IP providers?
    Response: Cablevision supports the goal of universal service. 
Cablevision contributes to the universal service fund through its its 
certified LEC, Lightpath, that provides telecommunications services to 
its VoIP service, Optimum Voice. Cablevision supports the FCC's 
continued efforts to review and rationalize the existing federal 
universal service system. Before a specific funding mechanism is 
adopted, key questions regarding the services to be funded and the pool 
of contributors must be addressed to ensure equity among competing 
carriers on a level playing field.
    Question: Do you believe that VoIP providers should not have a 
right to interconnect with local exchange carriers? Does your view 
change if the interconnection is indirect/virtual rather than direct?
    Response: Cablevision currently does not need the right to directly 
interconnect with ILECs due to its existing relationships with 
competitive local exchange carriers, which have interconnection 
agreements with ILECs.
    Question: Do you believe that VoIP providers are legally entitled 
not to have their services disrupted?
    Response: Cablevision does not believe any new legal requirements 
are necessary to ensure that broadband customers have access to VoIP 
services.
    Question: How should Congress ensure that broadband providers do 
not disrupt IP services offered over their networks? Should Congress 
legislate the so-called Net Freedoms or Net Neutrality Principles?
    Response: Cablevision's Optimum Online broadband service does not 
block or hinder its subscribers from accessing any content or service 
they choose or affect the quality of service offered by third party 
applications like Vonage. The marketplace will ensure that broadband 
subscribers receive access to the services they want. Government-
mandated access is unnecessary and counterproductive to broadband 
investment and deployment. Impeding broadband subscribers'' access and 
diminishing their enjoyment of their broadband service would be bad 
business, and any legislation that attempted to ``address'' this matter 
would be speculative and could have adverse consequences on both 
broadband providers and application providers.
    Question: Do you disagree that number portability should be 
available for VoIP customers?
    Response: VoIP providers should have the right to offer porting to 
their voice customers.
    Question: As a matter of policy, do you believe that ILECs should 
not be required to provide 911 network components to VoIP providers?
    Response: Access to the current 911 systems is dependent upon 
cooperation by the ILECs. Until there are real alternatives means to 
access 911 in a way that affords high reliability to all providers, 
VoIP service providers should be able to get the necessary 911 network 
components through the ILECs and have the ability to provide 911 
services to their subscribers.
    Question: Do you disagree that Congress should mandate that VoIP 
customers provide E911 services?
    Response: Cablevision provides E911 services to its VoIP service 
subscribers because we believe that it is valuable to our customers. We 
also believe that customers expect a reliable 911 service as a part of 
basic voice services. VoIP customers must have ready access to E911 and 
emergency services.

          FOLLOW-UP QUESTIONS FROM THE HONORABLE BARBARA CUBIN

    Question: Do you support a number or number-equivalent contribution 
model for a modernized Universal Service Fund?
    Response: Cablevision supports the goal of universal service, and 
its VoIP service contributes to universal service through its 
relationships with local exchange carriers that provide 
telecommunications services as part of the VoIP offering. Before a 
specific funding mechanism is adopted, the universal service system 
must be rationalized so that providers, particularly those who invest 
in facilities, are not disadvantaged in the marketplace because of the 
additional costs that must be recovered from customers.
    Question: The nature of IP voice seems to make it inherently 
difficult to track these packets and where they terminate. Is it really 
possible to tag them? If so, will that allow for an ``electronic paper 
trail'' for inter-carrier compensation?
    Response: Cablevision agrees with the FCC that it is virtually 
impossible to determine the jurisdictional nature of IP voice traffic. 
For this reason, Cablevision supports the FCC's intention to modernize 
the existing intercarrier compensation regimes to take into account the 
variety of voice services available in the market today and to migrate 
toward a more equitable, less administratively burdensome model that 
approximates today's peering and bill and keep arrangements.

           FOLLOW-UP QUESTIONS FROM THE HONORABLE BART GORDON

    Question: Would it help to guarantee that IP enabled telephony 
services have the same access to 911 facilities and databases as 
telecommunication service providers, and should this be done at the 
state or federal level?
    Response: Cablevision currently does not need access to 911 
facilities and databases for its Optimum Voice service due to its 
existing relationships with underlying telecommunications carriers that 
support this service directly. Cablevision, however, is supportive of a 
creative regulatory approach that supports the continued rollout of 
VoIP services and e911 availability. Where technical issues need to be 
addressed, Cablevision supports voluntary industry action over 
government regulation.
    Question: What 911 services are you currently providing with your 
VoIP services? How are you interconnecting with the 911 systems and 
have your company experienced any access problems?
    Response: Cablevision provides E911 services to its VoIP service 
subscribers. To do so, Cablevision partners with competitive local 
exchange carriers to obtain the necessary inputs for the services it 
offers, which include direct E911 trunking. Optimum Voice has had no 
difficulties with those trunking or access facilities.

           FOLLOW-UP QUESTIONS FROM THE HONORABLE ELIOT ENGEL

    Question: Again, I want to commend Cablevision's efforts to comply 
with 911. I understand Lightpath, your CLEC, also pays into the 
Universal Service Fund--I applaud that as well. I support Universal 
Service and the ERate program. However, it is funded by a fee based on 
inter-state traffic. Yet, I understand that if a Cablevision customer 
using VoIP in NY calls a Cablevision customer in Massachusetts, then 
your network does not register that as an ``interstate call.'' I say 
this to point out that the basic measure by which we fund USF is 
disappearing. Thus, we must find a new way--and so I would like to 
explore what this new way could be. I know this is complicated and it 
is hard, but we should have an open discussion about this. Do you have 
a proposal on how future payments into USF should be made or assessed?
    Response: Cablevision supports the FCC's continued efforts to 
review and rationalize the existing federal universal service system. 
Before a specific funding mechanism is adopted, key questions regarding 
the services to be funded and the pool of contributors must be 
addressed to ensure equity among competing carriers on a level playing 
field.

                                 
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