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



    HOW INTERNET PROTOCOL-ENABLED SERVICES ARE CHANGING THE FACE OF 
            COMMUNICATIONS: A VIEW FROM GOVERNMENT OFFICIALS

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

                                HEARING

                               before the

          SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 27, 2005

                               __________

                            Serial No. 109-4

                               __________

       Printed for the use of the Committee on Energy and Commerce


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


                               __________

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                    ------------------------------  

                    COMMITTEE ON ENERGY AND COMMERCE

                      JOE BARTON, Texas, Chairman

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

                      Bud Albright, Staff Director

        David Cavicke, Deputy Staff Director and General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

          Subcommittee on Telecommunications and the Internet

                     FRED UPTON, Michigan, Chairman

MICHAEL BILIRAKIS, Florida           EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida                 Ranking Member
PAUL E. GILLMOR, Ohio                ELIOT L. ENGEL, New York
ED WHITFIELD, Kentucky               ALBERT R. WYNN, Maryland
BARBARA CUBIN, Wyoming               MIKE DOYLE, Pennsylvania
JOHN SHIMKUS, Illinois               CHARLES A. GONZALEZ, Texas
HEATHER WILSON, New Mexico           JAY INSLEE, Washington
CHARLES W. ``CHIP'' PICKERING,       RICK BOUCHER, Virginia
Mississippi                          EDOLPHUS TOWNS, New York
VITO FOSSELLA, New York              FRANK PALLONE, Jr., New Jersey
GEORGE RADANOVICH, California        SHERROD BROWN, Ohio
CHARLES F. BASS, New Hampshire       BART GORDON, Tennessee
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE FERGUSON, New Jersey            BART STUPAK, Michigan
JOHN SULLIVAN, Oklahoma              JOHN D. DINGELL, Michigan,
MARSHA BLACKBURN, Tennessee            (Ex Officio)
JOE BARTON, Texas,
  (Ex Officio)

                                  (ii)




                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Billings, Hon. Lewis K., Mayor, Provo City, Utah.............     4
    Davidson, Charles M., Commissioner, Florida Public Service 
      Commission.................................................    33
    Fellman, Hon. Kenneth, Mayor, Arvada, Colorado, on Behalf of 
      National Association of Telecommunications Officers and 
      Advisors Board of Directors................................    20
    Munns, Diane, Commissioner, Iowa State Utilities Board, on 
      Behalf of National Association of Regulatory Utility 
      Commissioners..............................................    28
    Perkins, John R., Iowa Consumer Advocate, President, National 
      Association of State Utility Consumer Advocates............    44
    Quam, David C., Director, Federal Relations, National 
      Governors Association......................................    48
    Strauss, Karen Peltz, KPS Consulting, on Behalf of Alliance 
      for Public Technology......................................    52
Material submitted for the record by:
    Billings, Hon. Lewis K., Mayor, Provo City, Utah, letter 
      dated May 26, 2005, enclosing response for the record......    81
    Davidson, Charles M., Commissioner, Florida Public Service 
      Commission, letter dated May 27, 2005, enclosing response 
      for the record.............................................    85
    Fellman, Hon. Kenneth, Mayor, Arvada, Colorado, on Behalf of 
      National Association of Telecommunications Officers and 
      Advisors Board of Directors, letter dated May 27, 2005, 
      enclosing response for the record..........................    94
    Munns, Diane, Commissioner, Iowa State Utilities Board, on 
      Behalf of National Association of Regulatory Utility 
      Commissioners:
        Letter dated May 17, 2005, enclosing response for the 
          record.................................................    96
        Letter dated May 27, 2005, enclosing response for the 
          record.................................................    98
    Perkins, John R., Iowa Consumer Advocate, President, National 
      Association of State Utility Consumer Advocates, letter 
      dated May 17, 2005, enclosing response for the record......   147
    Quam, David C., Director, Federal Relations, National 
      Governors Association, letter dated May 27, 2005, enclosing 
      response for the record....................................   150
    Strauss, Karen Peltz, KPS Consulting, on Behalf of Alliance 
      for Public Technology, letter dated May 27, 2005, enclosing 
      response for the record....................................   152

                                 (iii)

  

 
    HOW INTERNET PROTOCOL-ENABLED SERVICES ARE CHANGING THE FACE OF 
            COMMUNICATIONS: A VIEW FROM GOVERNMENT OFFICIALS

                              ----------                              


                       WEDNESDAY, APRIL 27, 2005

              House of Representatives,    
              Committee on Energy and Commerce,    
                     Subcommittee on Telecommunications    
                                          and the Internet,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:22 p.m., in 
room 2322 of the Rayburn House Office Building, Hon. Fred Upton 
(chairman) presiding.
    Members present: Representatives Upton, Stearns, Gillmor, 
Whitfield, Shimkus, Pickering, Bass, Terry, Blackburn, Markey, 
Engel, Wynn, Gonzalez, Inslee, Boucher, Gordon, Rush, and 
Stupak.
    Staff present: Howard Waltzman, Chief Counsel; Neil Fried, 
Counsel; Will Norwind, Policy Coordinator; Jaylyn Jensen, 
Senior Legislative Analyst; Anh Nguyen, legislative clerk; 
Johanna Shelton, Telecommunications Counsel; Peter Filon, 
Counsel; and Alec Gerlach, Staff Assistant.
    Mr. Upton. Sorry about the delays. I think most of you 
know, we had a series of votes that started right about the 
time that we were supposed to be here, so I appreciate you all 
waiting patiently.
    Today's hearing is entitled ``How Internet Protocol-Enabled 
Services are Changing the Face of Communications: A View from 
Government Officials.'' This hearing is a finale of sorts in a 
series of hearings that this subcommittee has held in regard to 
IP-enabled services. Previous hearings have explored how, 
without a doubt, IP-enabled services are dramatically changing 
the face of communications.
    Many of these hearings have underscored the need for 
Congress to modernize our communications laws in order to 
account for this new technology and to ensure its speediest 
deployment as widely as possible, and bring true intermodable 
facilities based competition to the American consumer.
    At the close of this hearing, it is my intention to get to 
the business of legislating along those very lines, which 
brings us to why we are here today. The FCC has held that 
Internet services are inherently interstate in nature, and that 
even if there is also an intrastate component, it is not 
technologically feasible to separate it for purposes of State 
versus Federal jurisdiction. So Federal jurisdiction and the 
unified Federal broadband policy trumps State jurisdiction.
    I have to say that I agree with that approach to creating a 
Federal policy for IP-enabled voice, video, and data services, 
and that that will serve as my guiding principle for 
legislating in this arena. What that means for how we approach 
the traditional role of State public utility commissions and 
local franchise authorities in an IP-enabled world is what we 
will be exploring today.
    I want to thank today's distinguished panel of witnesses 
for being with us this afternoon to help us explore that very 
important subject, and I will yield to Mr. Gordon for an 
opening statement.
    Mr. Gordon. Thank you, Mr. Chairman, and thanks again for 
these continuing very informational hearings you are having.
    First, let me take just a moment. I would like to recognize 
a friend from Tennessee, Ms. Debbie Tate. She is the chairman 
of our Tennessee Regulatory Commission. More importantly, a 
native of Murfreesboro, Tennessee, often thought of as a dead 
hole in the universe by many folks.
    As we consider legislation to create a Federal framework 
for regulating IP-enabling services, it is critically important 
for us to consider what role State and local governments have 
to play in this new scheme. State and local governments have 
traditionally implemented and enforced issues such as consumer 
protection, CLEA, and the 911. While the technology may have 
changed, consumers and providers will continue to expect full 
government--local governments to fulfill these functions. I am 
particularly interested in hearing from the panel on the 911 
issue. I am working with my colleague, Chip Pickering, on 911 
legislation for IP-based services.
    I look forward to hearing from the panel, how they think 
the States can partner with the Federal Government to make sure 
that all IP-enabled telephony providers can provide full 911 
services as quickly as possible.
    I yield back my time. Thank you.
    Mr. Upton. Mr. Stupak for an opening statement.
    Mr. Stupak. Thank you, Mr. Chairman. Thanks for holding 
this hearing in the series that you have held on--in-depth 
hearings on the IP-enabled services. I think the committee now 
has a better understanding of where both the opportunities and 
challenges lie as we look at the Telecommunications Act.
    There are opportunities to update the Act to recognize and 
promote the promise of IP-enabled services, but we must do so 
with an eye on rural America, and with an understanding that 
these services can only go where broadband takes them.
    We heard last week that the U.S. has fallen further behind 
the industrialized world with regard to the deployment of 
broadband. Yes, new technologies will stimulate demand for and 
deployment of broadband in the U.S., and yes, regulatory 
certainty will help with the deployment of broadband as well. 
But will the market alone get broadband to rural America? I 
think this is a central question this committee needs to 
address. We need to draft our telecom laws in a way that 
embraces these new technologies, while helping all communities 
become connected to the future.
    Broadband is coming to my district by cable, DSL, wireless, 
and satellites. It is being provided by national companies, 
locally owned companies, local governments, and public 
utilities. For instance, the city of Gladstone in my district, 
with a population of 5,000, offers wireless broadband. The 
citizens of Gladstone benefit; so do those who live outside the 
city in very rural areas. They receive their broadband through 
a privately owned wireless system that connects to the 
Gladstone system. Other municipal utilities in my district may 
soon be offering DSL quality satellite broadband.
    Some have suggested that local government should not have 
the ability to offer broadband, and several states have 
implemented laws prohibiting it. I look forward to hearing from 
the witnesses today about what role they think local government 
should play in broadband deployment.
    I am also very interested in hearing from local governments 
about local franchise agreements for cable providers. We heard 
at last week's hearing that cable franchise must meet a series 
of local obligations, and I look forward to hearing from you 
why these obligations are necessary, especially the build-out 
requirements.
    I look forward to hearing from today's distinguished panel. 
As this distinguished panel knows, you do very hard, often 
thankless work, including answering consumer complaints, 
arbitrating disputes, and maintaining critical infrastructure. 
There is a reason why the Act gives State and local governments 
the responsibility they have today, and the committee needs to 
tread carefully when looking at moving some of the 
responsibilities to the Federal level.
    With that, I will yield back, Mr. Chairman. Thank you.
    Mr. Upton. Thank you.
    Mr. Inslee.
    Mr. Inslee. I just want to thank you for being so great at 
serving the local government. We are Congressmen and we don't 
have that kind of pull.
    Mr. Upton. Mr. Gonzalez.
    Mr. Gonzalez. Waive opening. Thank you.
    Mr. Upton. Thank you. There are a number of subcommittees 
that are meeting today. I have talked to a number of members 
that I know that are going to be coming for this hearing. 
Again, I apologize it is starting on a delayed basis. But at 
this point, we are prepared to listen to our witnesses.
    [Additional statement submitted for the record follows:]

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

    Mr. Chairman, thank you for holding this hearing. During the past 
several months, this subcommittee has conducted three hearings on how 
Internet Protocol technology is revolutionizing communications. Today, 
we will hear from state and local officials, and other interested 
parties, who hold views regarding the proper distribution of authority 
over Internet services among federal, state, and local governments.
    Given the global reach of the Internet, Internet services are 
inherently interstate in nature. Even if Internet services have 
intrastate and interstate components, the FCC has determined that it is 
not possible to separate those components for jurisdictional purposes. 
As a result, states cannot regulate Internet services without 
conflicting with federal policy over the Internet and interstate 
services.
    And a federal policy for Internet services is critical. We cannot 
expect new entrants to succeed in the Internet market if they have to 
comply with 52 different jurisdictions, not to mention if they have to 
comply with rules set by thousands of local franchising authorities.
    We need a federal policy with federal rules. There may be a 
constructive role for States and localities to play in implementing 
national rules, a role that I hope we examine fully in this hearing. 
But the Internet has thrived because it has been largely free from 
regulation. Burdening the Internet with multiple layers of bureaucracy 
will slow down its growth and slow down the deployment of innovative 
new services to consumers.
    I look forward to today's testimony, and welcome our witnesses' 
help in examining the proper distribution of authority over Internet 
services among federal, state, and local officials.
    Today we stand on the threshold of a new age in communications. The 
1996 Telecommunications Act served an important purpose, but technology 
has moved on. This year, one of my high priorities is to update the old 
act and to do it well. The right approach will invigorate the tech 
sector and produce jobs, growth and opportunity for its workers. 
American consumers will get an array of services and choices that were 
unimagined just a few years ago. I can't wait to get started.
    I yield back.

    Mr. Upton. We are joined by a distinguished panel, as all 
of us have indicated. We will start with the Honorable Lewis 
Billings, the Mayor of Provo City, Utah. Honorable Ken Fellman, 
Mayor of Arvada, Colorado, on behalf of the National 
Association of Telecommunications Officers and Advisors Board 
of Directors. We will hear from Ms. Diane Munns, Commissioner 
of the Iowa State Utilities Board. Mr. Charles Davidson, 
Commissioner of the Florida Public Service Commission. Mr. John 
Perkins, Iowa Consumer Advocate, President of the National 
Association of State Utility Consumer Advocates. Mr. David 
Quam, Director of Federal Relations, the National Governors 
Association; and Ms. Karen Peltz Strauss, KPS Consulting, on 
behalf of the Alliance for Public Technology.
    I want to start off by saying we appreciate you submitting 
your testimony in full so we could take it home last night. 
Your statements are made as part of the record in their 
entirety, and we would like to limit your remarks now to no 
more than 5 minutes. And I believe--I think there is a clock. 
Do you all have--is there a clock that you all see in front of 
you? No. Well, I have one, so when you hear this, that means 
your 5 minutes is done, and there is a clock in these lights 
above that clock that will tick down as well. So we apologize 
you don't have a clock to see, but I will try to signal you in 
there. If you can wrap up at that point, that would be 
terrific.
    We will start with you, Mr. Billings. Welcome.

 STATEMENTS OF HON. LEWIS K. BILLINGS, MAYOR, PROVO CITY, UTAH; 
  HON. KENNETH FELLMAN, MAYOR, ARVADA, COLORADO, ON BEHALF OF 
    NATIONAL ASSOCIATION OF TELECOMMUNICATIONS OFFICERS AND 
 ADVISORS BOARD OF DIRECTORS; DIANE MUNNS, COMMISSIONER, IOWA 
  STATE UTILITIES BOARD, ON BEHALF OF NATIONAL ASSOCIATION OF 
    REGULATORY UTILITY COMMISSIONERS; CHARLES M. DAVIDSON, 
   COMMISSIONER, FLORIDA PUBLIC SERVICE COMMISSION; JOHN R. 
     PERKINS, IOWA CONSUMER ADVOCATE, PRESIDENT, NATIONAL 
ASSOCIATION OF STATE UTILITY CONSUMER ADVOCATES; DAVID C. QUAM, 
 DIRECTOR, FEDERAL RELATIONS, NATIONAL GOVERNORS ASSOCIATION; 
AND KAREN PELTZ STRAUSS, KPS CONSULTING, ON BEHALF OF ALLIANCE 
                     FOR PUBLIC TECHNOLOGY

    Mr. Billings. Thank you, Chairman Upton, members----
    Mr. Upton. Use that mic for everyone, sir.
    Mr. Billings. Is that better?
    Mr. Upton. That is much better. Thank you.
    Mr. Billings. Thank you, Chairman Upton, members of the 
subcommittee. As has been said, I am Lewis Billings. I am the 
Mayor of Provo, Utah. Thank you for the opportunity to appear 
before you today on behalf of the American Public Power 
Association, APPA, to discuss the important role public power 
systems are playing in the deployment of affordable broadband 
services.
    APPA is the national service organization representing the 
interest of the Nation's more than 2,000 State and community-
owned electric utilities that serve over 43 million Americans. 
The vast majority of these utilities serve communities with 
populations of 10,000 people or less. Provo is one of APPA's 
larger members with approximately 33,000 metered customers, and 
a population of 113,000.
    Many of these public power systems were established largely 
due to the failure of private utilities to provide electricity 
to smaller communities, which were viewed as unprofitable. In 
these cases, communities formed public power systems to do for 
themselves what they viewed to be of vital importance to their 
quality of life and economic prosperity. Today, many public 
power systems are meeting the new demands of their communities 
by providing broadband services where such service is 
unavailable, inadequate, or too expensive. Over 600 public 
power systems now provide some kind of advanced communication 
service, whether for internal or external purposes. This is a 
10fold increase since Congress enacted the Telecommunications 
Act of 1996, and the number of public power systems providing 
or planning to provide services continues to increase. Using 
technologies such as fiber to the subscriber, hybrid fiber 
coaxial broadband over power lines, and wireless, community-
owned electric utilities provide a wide variety of services to 
their residents, either directly or in partnership with private 
sector providers.
    The types of services APPA members provide fall into two 
categories. The first is internal service, which is usually a 
municipal data network that connects municipal governmental 
entities to each other. As of the end of 2004, 247 public power 
systems offered municipal data networking.
    The second category is external service that is offered to 
individuals or entities outside of the utility and municipal 
government. External services include fiber lacing, high speed 
Internet access, broadband resell, cable television, local and 
long distance telephoning, and VoIP. As of the end of 2004, 102 
systems were providing cable television service, 167 were 
lacing fiber, 128 were Internet service providers, 42 provided 
long distance telephone, and 52 provided local phone service. A 
handful of systems are either providing or testing voice-over 
Internet protocol service. In addition, public power has been a 
leader in BPL, with Manassas, Virginia, being the first city in 
the Nation to provide broadband over the power line service. 
Based on the success of Manassas' project, other APPA members 
are now testing that technology, including Hagerstown, 
Maryland; Princeton, Illinois; and Rochester, Minnesota.
    Many communities have decided to provide residents and 
businesses with critical broadband infrastructure because they 
recognize the growing importance of broadband for commerce, 
healthcare, education, and improved quality of life. Looking to 
early pioneers of municipal broadband that have been models to 
other communities, they have seen the many benefits of 
providing access to an essential 21st century service. Some of 
the key benefits of municipally provided broadband service 
include lower prices, increased competitiveness in the 
communications marketplace, responsiveness to local needs, 
economic development, and universal access.
    Local governments are not the only entities that recognize 
the benefits of municipal broadband systems. A large number of 
organizations representing private industry, educational 
interests, and consumers support the availability of 
municipalities to provide broadband services. Included with my 
testimony are the statements of support from such organizations 
as the High Tech Broadband Coalition, Consumer Federation of 
America, the Free Press, Educause, and New America Foundation, 
as well as Intel. The United Tele Council and Fiber to the Home 
Council also plan to express their support by sending a letter 
to the subcommittee for inclusion in the record.
    The story of Provo's entry into the communications 
marketplace is similar to those of other municipalities across 
the country, which my written testimony discusses in more 
depth. Eight years ago, we undertook a careful study to 
determine how we could use technology to benefit our residents. 
After our thorough analysis, we decided we need to reconstruct 
our traffic control signal systems, make major upgrades to our 
utility monitoring and control systems, and bring about 
broadband interconnectivity between all city owned and operated 
facilities. As it turned out, all of these initiatives would be 
dependent upon our ability to obtain high speed data 
interconnectivity at various locations throughout our city. As 
we launched this--is my time up?
    Thank you. I will be happy to respond to questions.
    [The prepared statement of Lewis K. Billings follows:]

 Prepared Statement of Hon. Lewis K. Billings, Mayor, Provo, Utah, on 
            Behalf of the American Public Power Association

    Chairman Upton, Ranking Member Markey, and members of the 
subcommittee, my name is Lewis Billings, and I am the Mayor of Provo, 
Utah. Thank you for the opportunity to appear before you today on 
behalf of the American Public Power Association (APPA) to discuss the 
important role public power systems are playing in the deployment of 
affordable broadband services.
    APPA is the national service organization representing the 
interests of the nation's more than 2,000 community-owned electric 
utilities that serve over 43 million Americans. The utilities include 
state public power agencies, municipal electric utilities, and special 
utility districts that provide electricity and other services to some 
of the nation's largest cities such as Los Angeles, Seattle, San 
Antonio, and Jacksonville, as well as some of its smallest towns. The 
vast majority of these utilities serve small and medium-sized 
communities, in 49 states, all but Hawaii. In fact, 75 percent of 
publicly-owned electric utilities are located in communities with 
populations of 10,000 people or less. Provo is considerably larger than 
the average public power community, with approximately 33,000 metered 
customers and a population of 105,166.
    Many of these public power systems were established largely due to 
the failure of private utilities to provide electricity to smaller 
communities, which were viewed as unprofitable. In these cases, 
communities formed public power systems to do for themselves what they 
viewed to be of vital importance to their quality of life and economic 
prosperity. Today, public power systems are meeting the new demands of 
their communities by providing broadband services where such service is 
unavailable, is inadequate, or too expensive.
    Over 600 public power systems now provide some kind of advanced 
communications service, whether for internal or external purposes. This 
is a ten-fold increase since Congress enacted the Telecommunications 
Act of 1996, and the number of public power systems providing or 
planning to provide services continues to increase. The services 
delivered by public power systems include high-speed Internet access, 
voice-over-Internet protocol (VoIP), cable television, and local and 
long distance telephony.
    As this committee begins to formulate policies that would best 
foster a thriving, competitive communications marketplace, where 
affordable broadband service is available to all Americans as rapidly 
as possible, it should recognize the important role publicly owned 
electric utilities can play in achieving President Bush's goal of 
universal broadband deployment by 2007. Public power systems are 
providing a wide array of advanced communications services in 
underserved areas using a wide variety of platforms--fiber-to-the-
subscriber, broadband over power lines, hybrid fiber-coaxial, and 
wireless. They are also fostering a competitive marketplace where 
consumers are benefiting from the availability of advanced 
communications services that are the lifeblood of economic development 
and can support rich educational and employment opportunities, advanced 
health care, regional competitiveness, public safety, homeland 
security, and other benefits that contribute to a high quality of life.
    My testimony will provide an overview of why public power systems 
are providing advanced services over broadband networks, how they are 
providing those services, and the types of services being provided. It 
will also provide an overview of the campaigns waged against public 
power systems by the opponents of municipal broadband and the legal 
barriers to entry APPA's members face at the state level. In addition, 
my testimony will discuss the policy justifications for allowing 
municipalities to meet the needs of their communities by providing 
affordable broadband services and refute the arguments made by the 
opponents of municipal broadband.

  HISTORY IS REPEATING ITSELF: THE PARALLELS BETWEEN THE ELECTRICITY 
     MARKETPLACE A CENTURY AGO AND THE BROADBAND MARKETPLACE TODAY

    Before I address the reasons why community-owned electric utilities 
are providing broadband services, I think it is important to look 
briefly at the history of the electric utility industry and public 
power. There are many similarities between the early days of 
electrification at the turn of the 19th century and broadband 
deployment today.
    The electric utility industry is 125 years old. When 
electrification first began, many argued that electricity was a luxury. 
While that notion was quickly rebuked and it became widely recognized 
that electricity was a necessity for economic development, public 
health and safety, and quality of life, many smaller and rural 
communities were left behind. Private sector providers rushed to wire 
highly profitable urban areas, but failed to provide service to 
communities that were not attractive investments for private 
enterprise. Because of market failures such as lack of providers, poor 
service, and high prices, communities began creating their own electric 
utilities at a frantic pace.
    The community leaders who proposed public power did not regard this 
as an ideological choice between public versus private, but a pragmatic 
choice between providing this new utility or watching their communities 
fall by the wayside. Private providers saw things somewhat differently. 
Alarmed by the growth of municipal electric utilities, they conducted 
campaigns to erect barriers to entry. Some of their tactics included: 
(1) advocating a ``natural monopoly'' theory and calling for state-
regulated monopolies that would preclude direct competition between 
public and private utilities; (2) creating political opposition at the 
local level; and (3) engaging in anti-competitive practices such as 
denial of transmission access and predatory pricing. While private 
providers had some limited success in these efforts, public power 
survived and continues to thrive today.
    The similarities between the electricity marketplace a century ago 
and the broadband marketplace today are striking. Broadband access has 
many of the same fundamental dynamics and characteristics as 
electricity at the end of the 19th century. First, broadband is 
essential for economic development. Businesses must have affordable 
access to it to compete both regionally and globally in the 21st 
century. They will locate and expand where access is available and 
avoid cities and towns where it is not available. Second, broadband 
supports rich educational and employment opportunities, advanced health 
care, and other benefits that contribute to a high quality of life. 
Third, broadband has the same market failures today as electricity 
had--a lack of providers in some areas, or poor service and high cost 
in other areas. Public power systems began stepping in to address these 
market failures at the request of their towns and cities.

  WHY PUBLIC POWER SYSTEMS ARE PROVIDING ESSENTIAL BROADBAND SERVICES

    It is a natural progression for communities that own their own 
electric utilities to expand their services to include broadband. While 
public power communities are not the only communities providing 
broadband service, they have resources that make offering such service 
easier. Electric utilities use advanced communications technologies for 
internal purposes, such as monitoring electric distribution networks, 
automated meter reading, and internal wireline and wireless 
communications. It is not very difficult for such utilities to expand 
their communications capabilities to provide external, community-wide 
services when requested to do so by their residents.
    Community demand for services is usually driven by the failure of 
the market to provide specific services at reasonable prices that the 
community needs to grow and prosper. For many APPA members, the reason 
the utility even explored entering the communications marketplace was 
that businesses and residents came to them asking for service. In 
Scottsburg, Indiana, for example, the municipal electric utility 
deployed a wireless broadband network in order to prevent a Chrysler 
repair shop from leaving the town due to a lack of affordable 
broadband. Before pursuing this course of action, the local government 
first asked Verizon to provide the service. Verizon refused because the 
town was too small for the company to justify the investment. Had the 
municipally-owned utility not provided the service, at least 60 jobs 
would have been lost.
    Eight years ago in Provo, the city government undertook a careful 
study to determine how it could use technology to benefit its 
residents. Local officials decided to reconstruct Provo's traffic 
control systems, significantly upgrade its electric utility monitoring 
and control systems, and bring about broadband interconnectivity 
between all city-owned and operated facilities. As it turned out, all 
of these initiatives depended upon Provo's ability to obtain broadband 
at various locations throughout the city.
    The city approached five private sector companies that held 
franchise rights to provide fiber optic data connectivity. As part of 
their franchise agreements, all of the companies agreed to provide such 
service to all city owned facilities. None of them ever did. Ultimately 
Provo determined the best option would be to build its own city-wide 
fiber optic backbone. Soon after it was completed, local schools, small 
businesses, and others in our community asked to be connected. After 
careful study and analysis, the Provo City government decided to 
provide true high speed data access to the community at large. Our 
motivation for providing broadband was very similar to the motivations 
of other public power broadband communities.
    Economic development is a key reason for public power entry into 
the communications marketplace. The availability of affordable 
broadband service is critical to retaining existing businesses as well 
as attracting new businesses in today's highly competitive global 
marketplace. In many public power communities, business leaders and 
locally elected officials have approached the private sector about 
providing essential broadband services at affordable rates. In many 
cases, the private sector has responded that it did not have immediate 
plans to provide broadband service or upgrade existing services to meet 
the bandwidth needs of businesses and residents.
    Smaller communities have two choices--wait until an incumbent 
provider decides to provide service, if it does so at all, or build the 
network themselves. Many APPA members have decided to deploy broadband 
networks because they understand that access to advanced services helps 
retain and attract new businesses, creates new jobs, increases 
productivity, allows for telemedicine and telecommuting, and improves 
the quality of life for residents. These communities have recognized 
that if they waited for the private sector to provide affordable 
broadband service, they would fall behind and not be able to compete in 
today's information age.
    Public power systems throughout the United States have seen direct 
economic benefits from deploying broadband networks. They have 
attracted new businesses as well as retained existing businesses 
because of their broadband networks. In Cedar Falls, Iowa, the Mudd 
Group, a marketing, advertising, and public relations firm specializing 
in the automotive industry would have left the city if affordable 
broadband services were not available. Because the municipal electric 
utility constructed a fiber-to-the-business network, Mudd expanded its 
business and soon plans to break ground on a studio to produce digital 
media. TEAM Technologies, a web hosting and data management company, 
moved to Cedar Falls in 1996 because of the city's communications 
infrastructure. In 2004 TEAM finished construction of a multi-million 
dollar data center that provides highly reliable and secure data 
services, including bandwidth and back up storage service for corporate 
clients.
    A 2004 report entitled The Economic and Community Benefits of Cedar 
Falls, Iowa's Municipal Telecommunications Network by Doris Kelly of 
Black and Veatch, which analyzed the economic growth of Cedar Falls and 
the neighboring city of Waterloo, attributed Cedar Falls' higher tax 
base and job growth to the presence of a municipal broadband 
network.1 Waterloo and Cedar Falls are very similar 
communities. What distinguishes them from each other is the presence of 
a municipal broadband network. Similarly, a recently published study 
involving Lake County, Florida, showed that public communications 
projects can have a very significant positive impact on the economic 
development of an area.2 Clearly, the availability of 
affordable broadband service is an important factor in businesses' 
decisions to locate to an area, and a driver of economic development.
---------------------------------------------------------------------------
    \1\ See Doris Kelly, The Economic and Community Benefits of Cedar 
Falls, Iowa's Municipal Telecommunications Network, Black and Veatch, 
July 6, 2004.
    \2\ George S. Ford and Thomas M. Koutsky, Broadband and Economic 
Development: A Municipal Case Study from Florida, http://
www.aestudies.com/library/econdev.pdf.
---------------------------------------------------------------------------
   TECHNOLOGIES USED BY PUBLIC POWER TO PROVIDE ESSENTIAL BROADBAND 
                                SERVICES

    Public power systems that are providing broadband services are 
using a wide variety of technologies to do so. Publicly owned electric 
utilities such as Provo, Utah, Bristol, Virginia, Kutztown, 
Pennsylvania, Jackson, Tennessee, Grant County Public Utility District, 
Washington, and Dalton, Georgia have built fiber-to-the-subscriber 
networks. These ultra-high-speed fiber systems provide users with 
voice, video, and data services as well as give them the ability to 
utilize high bandwidth applications such as real-time video 
conferencing, IP video, and rich multimedia activities such as 
interactive games.
    Other communities such as Wyandotte and Coldwater, Michigan, 
Glasgow, Kentucky, and Muscatine, Iowa provide broadband service over 
hybrid fiber-coaxial networks similar to those used by cable companies. 
This type of network can provide residents with high-speed Internet 
access using a cable modem, as well as cable television and VoIP 
service.
    More recently, APPA members have been using wireless technology to 
provide broadband service. Scottsburg, Indiana, Owensboro, Kentucky, 
Coldwater, Michigan, and Spencer, Iowa are just a few of the systems 
providing wireless broadband. Provo has also embraced this technology 
as our businesses and residents see this as an important and expected 
infrastructure in the community.
    In addition, APPA members are also starting to provide broadband 
service using broadband over power line (BPL) technology. Manassas, 
Virginia, is the first municipality in the country to provide its 
residents with BPL service. This technology allows electric utilities 
to use their power lines to provide high-speed Internet access service 
comparable to DSL service, with equal download and upload speeds. This 
exciting technology not only allows public power systems to provide 
affordable Internet access service, but also allows utilities to 
improve the monitoring of their electric distribution networks, which 
increases electric reliability and helps detect outages in real time 
without the need to hear from customers about power outages. Other APPA 
members testing BPL include Hagerstown, Maryland, Princeton, Illinois, 
and Rochester, Minnesota.

           ADVANCED SERVICES PROVIDED BY PUBLIC POWER SYSTEMS

    Community-owned electric utilities provide a wide variety of 
services to their residents either directly or in partnership with 
private-sector providers. The types of services APPA members provide 
fall into one of two categories. The first is internal service, which 
is usually a municipal data network that connects municipal 
governmental entities to one another. As of the end of 2004, 247 public 
power systems offered municipal data networking.
    The second category is external service. These services are offered 
to individuals or entities outside of the utility and municipal 
government. External services include fiber leasing, Internet access 
(both high-speed and dial-up), cable television, broadband resale, 
local and long-distance telephony, and VoIP. As of the end of 2004, 102 
systems were providing cable television service, 167 were leasing 
fiber, 128 were Internet service providers, 42 provided long-distance 
telephone, and 52 provided local-phone service. A handful of systems 
are either providing or testing VoIP service.

              THE MANY BENEFITS OF PUBLIC POWER BROADBAND

    Many communities have decided to provide residents and businesses 
with critical broadband infrastructure because they recognize the 
growing importance of broadband for commerce, health care, education, 
and improved quality of life. Looking to the early pioneers of 
municipal broadband that have been models to other communities, they 
have seen the many benefits of providing access to an essential 21st 
century service. Some of the key benefits of municipally provided 
broadband service include lower prices, increased competitiveness in 
the communications marketplace, responsiveness to local needs, economic 
development, and universal access.
    In many cities and towns across America, broadband service is too 
expensive for businesses and residents. In Iowa for example, the Iowa 
Utility Board has reported that many communities are charged up to $169 
a month for 1 mega-bits-per-second DSL service.3 However, in 
public power communities that are providing broadband service, 
consumers are paying lower rates for such service. In Manassas, 
Virginia, residents can get BPL service for $28.95 a month. In response 
to the presence of a third provider of broadband service (the City of 
Manassas in partnership with COMTek, a telecommunications and 
information systems technology company) both Comcast and Verizon 
lowered their prices in Manassas. Consequently, even those residents 
who have not switched to Manassas' BPL service have received a direct 
economic benefit from the introduction of a third provider in the form 
of lower prices from the incumbent providers.
---------------------------------------------------------------------------
    \3\ See Connecting the Public: The Truth About Municipal Broadband, 
Media Access Project, Consumer Federation of America, Free Press 
available at http://www.mediaaccess.org/MunicipalBroadband--
WhitePaper.pdf (citing http://www.iowatelecom.com/residential services/
article.asp?id=220&PID&GPID).
---------------------------------------------------------------------------
    The presence of municipal broadband providers has also resulted in 
a more competitive communications marketplace. Many public power 
broadband networks provide open access to other private sector 
providers. Competitive local exchange carriers and other competitive 
communications companies use municipal networks to deliver services to 
businesses and residents. In fact, the presence of a municipal provider 
can actually increase the number of competitive providers in a 
marketplace. An economic analysis by George Ford of Applied Economic 
Studies found that in Florida, localities that owned their own 
broadband network had more competitive local exchange carriers in the 
marketplace than localities that did not have municipal broadband 
networks.4 Rather than crowding out investment, as asserted 
by the opponents of municipal broadband, it appears that the presence 
of such a system actually increases the number of communications 
providers in the market.
---------------------------------------------------------------------------
    \4\ See George S. Ford, ``Does Municipal Supply of Communications 
Crowd Out Private Investment? An Empirical Study,'' Applied Economic 
Studies (February 2005) at http://www.aestudies.com/.
---------------------------------------------------------------------------
    In addition, municipal broadband providers are highly responsive to 
local needs. Residents can have a direct say in the types of services 
provided over broadband networks. Utility managers and locally elected 
officials are available to the public at open meetings to discuss their 
concerns and seek input on how to improve or expand service. Also, 
customer service is locally available to help individuals with setting 
up their service or fixing problems.
    Universal access is another benefit of municipal broadband. Public 
power systems providing broadband services ensure that all residents 
can receive such services and at an affordable rate. Low-income 
neighborhoods are not passed by. Schools and hospitals are provided 
with significant bandwidth to enable rich multimedia applications that 
improve education and health care. For example, in Leesburg, Florida, 
public hospitals can send medical images such as MRIs and x-rays to 
doctors' offices in seconds over the city's optical network.
    Economic development is yet another benefit of municipal broadband. 
As stated earlier, local governments recognize the importance of 
broadband for commerce, education, health care, and quality of life. 
The availability of affordable broadband helps retain and attract 
businesses, leading to more jobs and stimulation of the local economy. 
In Kutztown, Pennsylvania, Saucony Book Shop moved its business from 
Allentown, Pennsylvania, because of the borough's fiber-to-the-
subscriber network. Paisley & Company bath shop also moved to Kutztown, 
opening a shop downtown and advertising its products online. In Provo, 
Riverwoods Medical Imaging Center employs state-of-the-art software to 
deliver hundreds of digital images to doctors quickly over the 
Internet. Without the bandwidth available over Provo's fiber network, 
Riverwoods would not have been able to provide its digital imaging 
services.
    Local governments are not the only entities that recognize the 
benefits of municipal broadband systems. A large number of 
organizations representing private industry, educational interests, and 
consumers support the ability of municipalities to provide broadband 
services and have publicly expressed so. Included with this testimony 
are statements of support from such organizations as the High Tech 
Broadband Coalition, Consumer Federation of America, Free Press, 
Educause, and New America Foundation as well as Intel. The United 
Telecom Council and Fiber to the Home Council also plan to express 
their support by sending a letter to the subcommittee for inclusion in 
the record.

   LEGAL BARRIERS TO ENTRY FACED BY MUNICIPAL PROVIDERS OF BROADBAND 
                      SERVICES AT THE STATE LEVEL

    Just as there was fierce opposition from private enterprise to 
publicly owned electric utilities 125 years ago, today there is fierce 
opposition to publicly owned broadband networks from private 
enterprise. Opponents of municipal broadband have used a variety of 
tactics to undermine, discredit, or block the deployment of broadband 
by public power systems. Threatened by the prospect of a public 
provider that is responsive to community needs and charges affordable 
rates, telephone and cable companies, many of which have no plans to 
provide service themselves, have aggressively pushed for legislation in 
state legislatures across the country that would either prohibit 
municipalities from providing broadband services or significantly limit 
their ability to do so by erecting barriers to entry.
    Currently 14 states have enacted laws that either prohibit 
municipalities from providing telecommunications, cable, and/or 
broadband services or limit their ability to do so through barriers to 
entry. This year alone, bills have been introduced in 14 states that 
would restrict the ability of municipalities to provide advanced 
services to their communities either directly or in partnership with 
other private sector providers.5 In all instances, these 
measures have been pushed by incumbent telephone and cable companies 
seeking to eliminate potential competitors.
---------------------------------------------------------------------------
    \5\ In 2005, legislation has been introduced in Colorado, Florida, 
Illinois, Indiana, Iowa, Louisiana, Michigan, Nebraska, Ohio, Oregon, 
Tennessee, Texas, Virginia and West Virginia. In Virginia and West 
Virginia, pro-municipal broadband bills were amended to limit the 
ability of localities to provide service.
---------------------------------------------------------------------------
    Early measures pushed by the opponents of municipal broadband 
advocated prohibiting municipalities from providing telecommunications 
and other services. Texas, Missouri, and Nebraska enacted laws 
prohibiting municipalities from providing telecommunications services. 
Arkansas enacted legislation prohibiting local governments from 
providing local exchange service and Nevada precludes municipalities 
with populations larger than 25,000 from providing retail 
telecommunications service.
    Other states have not enacted outright bans, but have instead 
adopted laws that create barriers to entry by significantly restricting 
the ability of municipal entities to provide advanced communications 
services. These statutes impose burdensome procedural and accounting 
requirements, such as referenda, the imputation of certain costs not 
actually incurred, and public disclosure of information to which 
private sector providers are not subject. States that have adopted such 
approaches include Florida, Minnesota, South Carolina, Tennessee, 
Virginia, Wisconsin, and Utah. In addition, Utah and Washington have 
adopted wholesale-only models, which prevent a municipal entity from 
directly providing service to the public.
    The latest approach advocated by opponents of municipal broadband 
is probably the one most familiar to members of this subcommittee--the 
right of first refusal--which was adopted by Pennsylvania late last 
year. It requires local governments to ask the permission of incumbent 
providers as a condition precedent to providing broadband services to 
the community. If the incumbent telephone or cable company indicates 
that it will provide the service within a certain time frame, the 
municipality is precluded from ever providing the service itself. This 
may appear reasonable at first glance, but as usual, the devil is in 
the details. The law makes data speed the only criteria and thus makes 
no provision for price, quality of service, consumer choice, mobility, 
symmetry, or any other factor, however significant it might be to the 
local community. In other words, nothing in the law provides a remedy 
if the incumbent provider states it will provide the requested service 
in the statutory time period, yet does not build or upgrade a network 
that provides the capabilities and services the community wanted.

  CAMPAIGNS WAGED BY OPPONENTS OF MUNICIPAL BROADBAND AGAINST PUBLIC 
                  POWER AND OTHER MUNICIPAL PROVIDERS

    In addition to pushing for anti-municipal broadband legislation at 
the state level, incumbent telephone and cable companies have utilized 
a variety of tactics to undermine and discredit community-owned 
broadband networks. Working with corporate-funded think tanks, 
opponents have maligned municipal broadband projects, asserting they 
are destined to fail, are subsidized by taxpayers, and/or crowd out 
private investment with little to no empirical basis for such 
assertions. In communities where local governments have asked their 
citizens to vote to go forward with projects, incumbent providers have 
spent significant amounts of money on anti-municipal broadband 
campaigns with the knowledge that municipal governments are legally 
precluded from spending any funds to promote projects. For example, in 
the tri-cities area of St. Charles, Batavia, and Geneva, Illinois, the 
Kane County Chronicle (IL) reported that Comcast and SBC spent over 
$300,000 on mailers, push-surveys, full-page newspaper ads, and local 
radio spots full of misinformation on municipal broadband 
projects.6
---------------------------------------------------------------------------
    \6\ See http://www.kcchronicle.com/SportsSection/
310254315460507.php.
---------------------------------------------------------------------------
    Representatives of incumbent companies have also employed scare 
tactics to dissuade local citizenry from supporting community-owned 
broadband projects. At a Lafayette, Louisiana, city-parish council 
meeting, a representative of Cox Communications suggested that if 
Lafayette Utilities Systems (LUS), the city's municipal electric 
utility, went forward with its fiber-to-the-premises project, it could 
invade the privacy of its subscribers by ``allow[ing] LUS to monitor 
people's private phone, Internet or television viewing.'' 7
---------------------------------------------------------------------------
    \7\ See 2theadvocate.com Durel Defends LUS Plan (May 1, 2004) at 
http://www.2
theadvocate.com/cgi-bin/printme.pl
---------------------------------------------------------------------------
               ARGUMENTS MADE AGAINST MUNICIPAL BROADBAND

    As was briefly discussed above, opponents of municipal broadband 
have asserted a variety of arguments for why local governments should 
not provide broadband service. Many of these arguments aver that 
municipalities have an unfair advantage because of their position as 
both competitive providers and regulators of services and that public 
entry is contrary to ``level playing field'' principles. Opponents also 
claim that municipal communications systems are failures and that 
municipal governments are too incompetent to operate such 
``complicated'' technologies. A closer look at these arguments reveals 
these claims are false.
    One common argument made by opponents of municipal broadband is 
that localities providing such service are competing against the 
private sector companies they regulate. This assertion is quite 
misleading. Municipalities do not, and cannot, favor their own 
municipal service entities. Municipalities do not regulate 
telecommunications service providers or Internet access providers. Such 
regulation occurs at the federal and state levels, and even there, it 
is disappearing rapidly. Municipalities do issue franchises to cable 
operators, but cable franchising is governed by detailed federal 
standards, and when municipalities provide cable services themselves, 
they typically assume regulatory burdens that are as extensive, or more 
extensive, than the private sector's.
    Municipalities also manage public rights of way and other public 
facilities. But federal and most state laws require municipalities to 
act in a nondiscriminatory, competitively-neutral manner. In short, the 
premise underlying this myth--that municipalities have power to 
regulate in favor their own services--is simply false.
    A second common argument made by the opponents of municipal 
broadband is that localities have an unfair advantage against private 
sector communications providers because they do not pay taxes. It is 
true that public power systems are treated the same way as other 
governmental and non-profit entities under federal and state tax law--
they do not pay income taxes because they do not earn profits. At the 
local level, public power utilities are routinely required to make 
payments in lieu of taxes to the local government that are often higher 
in amount than what investor owned electric utilities pay in taxes. 
Evidence in Florida and other states indicates that the same is likely 
true of the payments made to local governments by public power 
broadband systems and private sector communications providers. 
Furthermore, public power utilities do not have access to the wide 
variety of tax benefits, such as accelerated depreciation and 
investment tax credits, available to the private sector. In Florida, 
for example, Bell South paid an effective state/local tax rate of 3.4% 
and Verizon paid 3.6%. Florida's municipal electric utilities paid an 
effective rate of 14.6%.8 It is difficult to see how private 
providers can complain about the tax exempt status of public power 
systems that pay more to state and local governments than the private 
providers do.
---------------------------------------------------------------------------
    \8\ See ``The Case for Municipal Broadband in Florida: Why Barriers 
to Entry Stifle Economic Development, Disadvantage School Children, and 
Worsen Health Care,'' Florida Municipal Electric Association (citing 
FMEA and FCC ARMIS 43-03 (2003)).
---------------------------------------------------------------------------
    A third common argument asserted against municipal broadband is 
that localities have access to low-cost financing. The use of tax-
exempt financing is a perfectly legitimate practice for pubic 
improvement projects. However, in today's market, tax-exempt financing 
is not always available and comes with many onerous burdens. While 
there is some advantage to tax-exempt financing, it may not be terribly 
significant because incumbent cable and telephone companies have access 
to the best commercial rates.
    The opponents of public power broadband also argue that localities 
cross-subsidize communications services at the expense of electric rate 
payers. State and local enterprise laws prohibit municipal electric 
utilities from cross-subsidizing communications and other services with 
electric revenues. Such an argument is also disingenuous when the 
private sector is free to engage in cross-subsidization and routinely 
does so. Predatory pricing by incumbents in communities with municipal 
broadband networks is regional cross-subsidization. They are 
subsidizing service to the residents of those communities where 
competition exists at the expense of customers in localities that do 
not have community-owned broadband networks.
    Yet another claim made against municipal broadband projects is that 
most are financial failures. Think tanks funded by incumbent telephone 
and cable companies have released papers claiming that various 
municipal broadband systems have failed. These ``studies'' are simply 
incorrect. Using flawed analyses, the authors of these ``studies'' 
apply performance criteria applicable to the private sector to 
municipal projects even though municipal projects have fundamentally 
different objectives. Public power systems are not trying to maximize 
profits. Instead, local governments set rates at the lowest level 
possible that will allow the utility to recover its costs and save 
their customers money. Some reports have also analyzed projects not 
operating long enough to generate meaningful data. Opponents routinely 
cite Cedar Falls, Iowa as a failure in spite of the empirical evidence 
to the contrary. Copies of numerous studies providing point-by-point 
rebuttals to industry claims of municipal ``failures'' are available at 
http://www.baller.com/barriers.html.
    Closely related to the failure argument is the claim that broadband 
networks are too complex a business for public power utilities. To 
assert that 100-year old entities with a long history of running highly 
complex electric systems cannot operate broadband networks is absurd. 
Public power systems that choose to provide broadband service are well 
prepared to provide such service. Many have used communications 
networks to provide internal services and monitor their electric 
distribution systems. In addition, several APPA members have been 
providing cable television service for over 20 years. Frankfort Plant 
Board in Kentucky has been providing cable service since 1954. 
Muscatine, Iowa, was one of the first cable TV operators in the country 
to deploy video on demand service in 2003. Frankfort Plant Board and 
Coldwater, Michigan, both deployed VoIP service in the summer of 2003, 
prior to when many cable MSOs began offering service. Assertions of 
municipal incompetence or lack of ability to manage broadband networks 
are clearly without merit.

                               CONCLUSION

    Public power systems throughout the country are meeting their 
communities' needs by providing access to affordable broadband 
services. Recognizing the importance of broadband for commerce, health 
care, education, and improved quality of life, underserved communities 
are constructing their own networks to compete and thrive in today's 
information age. Many benefits accrue from community-owned 
communications systems including lower prices for consumers, increased 
competitiveness in the marketplace, responsiveness to local needs, 
universal access, and economic development. In spite of the obvious 
benefits of municipal broadband, incumbent telephone and cable 
companies have opposed such projects, pushing for legislation at the 
state level to prevent municipalities from providing broadband. Rather 
than work with local governments to provide service or acknowledge that 
municipalities that choose to provide broadband have legitimate reasons 
to do so, incumbent private providers assert disingenuous claims and 
unsubstantiated arguments. As this subcommittee begins to formulate 
policy on how best to promote a competitive communications marketplace 
where customers have access to a wide variety of Internet protocol-
enabled services, APPA hopes the committee will see through the 
baseless assertions of incumbent providers and recognize the important 
role that public power systems can play in providing such services to 
underserved communities.

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    Mr. Upton. Man, if everyone was that responsive, that would 
be terrific. Thank you. You went a little bit long, but it was 
good. Thank you. Again, your full statement is part of the 
record.
    Mr. Fellman.

                  STATEMENT OF KENNETH FELLMAN

    Mr. Fellman. Thank you, Chairman Upton, Ranking Member 
Markey, members of the subcommittee. Thank you for the 
opportunity to testify this afternoon.
    I am the mayor of Arvada, Colorado, a city of 104,000 
people located just outside of Denver, and I appear today as a 
representative of the Nation's local elected leaders and their 
advisors. Because many local elected officials serve with 
little or no compensation, I have another job as well. In my 
professional capacity, I am an attorney and I work with local 
governments on a wide variety of communications and other 
issues.
    I am also here today, like you, as an elected official who 
looks at new technology with a great deal of excitement, and 
one whose constituents and businesses want more choices at 
lower prices. And like all of you, I am seeking the best 
balance for our citizens, our economy, and our local 
communities.
    Today, on behalf of local governments, I ask this committee 
for three things.
    First, recognize the inherent police powers of local 
government, and its right to manage and charge for the use of 
public rights of way.
    Second, please take a deliberative approach as you consider 
the appropriate scheme for addressing IP services, and ensure 
that any new regulatory regime recognizes the core social 
obligations of our service providers.
    And third, appreciate the unique neighborhood-by-
neighborhood expertise that local government has to oversee 
these social obligations, which include public safety, 
broadband deployment, and preventing economic red-lining.
    Additionally, because I know this committee has heard some 
negative characterizations of the franchising process, I draw 
the committee's attention to the detailed written testimony 
which we believe demonstrates a more accurate representation.
    We support a technology neutral approach that promotes 
broadband deployment and competitive service offerings. But 
Internet innovations are meaningless if the networks used to 
deliver them are not widely available to our citizens. As 
technology improves, most of the infrastructure for these new 
services resides in the public rights of way. Local officials 
must ensure that the infrastructure does not interfere with 
other infrastructure, is safe, and we must preserve fair 
opportunities for all competitors who use the rights of way. As 
fiduciaries, we must make sure that the public is compensated 
when private actors use public land.
    To exercise our core police powers, local government must 
manage the right of way, and we thank Chairman Barton for his 
historic work in support of the existing Section 253, which 
preserves local authority and control over the public rights of 
way.
    We believe that Federalization of all IP services would not 
serve the public interest, and would violate the principle of 
technology neutrality. It would create disparate treatment of 
entities, solely on the nature of the services provided. 
Functionally equivalent services that compete with one another 
in the eyes of consumers should face the same government 
obligations. Local governments want to ensure that we can 
continue to require that social obligations of providers be 
met, and that consumers be protected.
    There are several important obligations of today's video 
providers that are enforced at the local level. These include 
access channels, institutional networks, and prohibitions on 
economic redlining. Many Members of Congress are frequent 
guests or hosts on cable access channels. Congressman Markey 
is, Congresswoman Myrick is, my own Congressman, Bob Oprey, has 
his show appearing on access channels in Colorado's seventh 
district. Access programming serves a vital role in our 
communities. Institutional networks provide redundancy in terms 
of emergencies. For example, in New York City's network 
remained operational during the events of September 11, 2001. 
And as this committee has noted, prohibitions on economic 
redlining are critical to ensure all citizens will benefit from 
competition.
    Finally, I would like to briefly explain the current 
franchising process, which unfortunately, is misunderstood by 
many. Cable franchising is essentially a light touch national 
regulatory framework with local implementation. The Cable Act 
authorizes local governments to negotiate for a relatively 
limited range of obligations imposed upon cable operators, and 
virtually none of those obligations are mandatory. The 
framework for economic regulation of video providers utilizes 
that light touch economic regulation that the telephone 
companies seek. And while the current economic regulation is 
limited, it still plays an important consumer protection role. 
Recently, it disclosed a $5 million overcharge by one cable 
operator.
    My written testimony covers franchising in more detail.
    In conclusion, we believe that any new national 
communications policy should preserve local government's 
authority to ensure public health, safety, and welfare, allow 
us to support important policy goals, enable us to address our 
communities' communications needs. What this means is that we 
are asking you to preserve our local control and management of 
the public rights of way, and the ability to impose and collect 
taxes and fees necessary to fund essential services. Please 
take a deliberate approach, even as you seek to update economic 
rules, and do not eliminate the core social obligations of 
video programmers, regardless of the technologies they use. We 
urge you to appreciate and preserve the neighborhood-by-
neighborhood expertise that local government brings to 
overseeing these social obligations, like public safety, 
broadband deployment, and the prohibition of economic 
redlining.
    And I thank you, and look forward to answering your 
questions.
    [The prepared statement of Kenneth Fellman follows:]

Prepared Statement of Hon. Kenneth Fellman, Mayor, Arvada, Colorado on 
 Behalf of The National Association of Telecommunications Officers and 
 Advisors, The National League of Cities, The United States Conference 
          of Mayors, and The National Association of Counties

    Chairman Upton, Ranking Member Markey, and members of the 
subcommittee.
    Thank you for the opportunity to testify this afternoon. I am the 
Mayor of Arvada Colorado, a municipality incorporated in 1904, and the 
site of Colorado's first documented gold strike. We have a population 
of approximately 104,000, and are located on the northwest side of 
Denver. I appear today as a representative of local elected leaders and 
their technical advisors. I play a key role in several national 
organizations representing local government interests and speak today 
on behalf of National Association of Telecommunications Officers and 
Advisors (``NATOA''), the National League of Cities (``NLC''), the 
United States Conference of Mayors (``USCM'') and the National 
Association of Counties (``NACo'').1
---------------------------------------------------------------------------
    \1\ Mayor Fellman is a member of the NATOA Board, and Chair of its 
Convergence Committee; Chair of the Information Technology and 
Communications Steering and Advocacy Committee of the National League 
of Cities and as such represents NLC at the NGA-led tax negotiations; 
Vice Chair of the Communications Task Force and a member of the 
Communications and Transportation Standing Committee of the U.S. 
Conference of Mayors; Local Elected Official Member of the Department 
of Homeland Security's SAFECOM Executive Committee; Former Chair of 
Local State Government Advisory Committee to the FCC; and a practicing 
attorney representing local governments.
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    I have the great pleasure today of being authorized to speak here 
on behalf of all of these prestigious organizations that represent 
thousands of local elected officials and their advisors throughout the 
country. I am also here today, like you, as an elected official who 
looks at new technology with a great deal of excitement. Like you, 
every day I hear from my constituents who want more choices for 
communications services with a full range of competitive prices. Like 
you, I hear from small, medium and large businesses that want to 
receive communications products and services to enable them to remain 
competitive or to offer more products and services to their customers. 
Like you, I hear from my first responders that they lack some essential 
communications tools to protect public safety. Like you, I hear the 
concerns of citizens who want technology to improve their interaction 
with their elected officials and their government. Like many 
businesses, local governments are significant and sophisticated users 
of telecommunications technology. And, like all of you, I am seeking 
the best balance for our citizens, our economy, and our local 
communities.
    Because many local elected officials serve with little or no 
compensation, I have another job as well. In my professional capacity I 
am an attorney, and I work with local governments nationally on a wide 
variety of communications and other issues.
    Local governments embrace the technological innovation that this 
Committee has been hearing about over the last several months. We want 
and welcome real communications competition in video, telephone and 
broadband services. And, I am here to commit that we support a 
technology-neutral approach that promotes broadband deployment and 
competitive service offerings. Local governments have been managing 
communications competition for many years now ( it is not new. What is 
exciting is the presence of a few well-funded and dominant players who 
appear to have finally made a commitment to competition in the video 
arena. We look forward to developing an even more successful 
relationship in bringing these competitive services home to America.
    I also want to emphasize at the outset the close working 
relationship and shared views among the national organizations 
representing local and state government. The local organizations I 
represent today have been working together with the National Governors 
Association and National Association of Regulatory Utility 
Commissioners and are unified in our support of the principles of state 
and local authority, public safety, universal access to 
telecommunications, use of public property and rights-of-way, consumer 
protection, competition and taxation. State and local governments' 
interests are closely aligned on the topics that NGA and NARUC will 
cover today, particularly in the area of universal service, access to 
E911, public safety and CALEA. And, as you've heard (or will hear) from 
Mayor Billings today on behalf of the public power community, we stand 
in support of the ability of local governments to serve their 
constituents' needs and interests by self-provisioning, especially at 
times when the traditional industry providers are unwilling or unable 
to do so.

             LOCAL GOVERNMENT ASKS THREE THINGS OF CONGRESS

    Today, on behalf of local government, I ask this Committee for 
three things. First, recognize the inherent police powers of local 
government including its right to manage and charge for the use of 
public right-of-way. Second, take a deliberative approach as you 
consider the appropriate scheme for addressing IP services which 
recognizes the core social obligations of service providers. And third, 
appreciate the neighborhood-by-neighborhood expertise local government 
brings to overseeing these social obligations, including public safety, 
broadband deployment, and prohibiting economic redlining.

            THE USE OF INTERNET PROTOCOL TO DELIVER SERVICES

    Internet protocol was developed almost 40 years ago, at the time 
the original Internet was being developed. Its use today to deliver 
data, telephone and video, is something that has evolved and improved 
over time, and is now so prevalent as to warrant congressional 
attention. The promise of competitive services being delivered through 
the use of IP is exciting and challenging--it's just not necessarily 
new. The communications tools we use every day have all evolved under 
the careful eye of federal, state and local governments, as should the 
communications tools of the future. These Internet innovations are 
meaningless if the networks used to deliver them are not widely 
available to all of our citizens. Deployment of the infrastructure used 
to deliver these services is of specific interest and concern to those 
of us who manage the physical property where this infrastructure 
resides and will be installed. This is why local government has long 
promoted the efficient and effective deployment of infrastructure 
within and through our communities.

           LOCAL GOVERNMENT HELPS ENSURE BROADBAND DEPLOYMENT

    We all share the concern of a lack of broadband access throughout 
America, in urban and rural areas alike. Regardless of the locality, it 
is likely that communications technologies will be a driving force in 
the economic opportunities enjoyed by the communities that have access 
to advanced services. I believe that the Cable Act has provided 
significant benefits to consumers and communities alike, and I believe 
that local government should be applauded for ensuring those benefits 
were provided in a timely, fair and efficient manner. Under the current 
regulatory regime, cable enjoys the highest deployment rate of 
broadband in this nation, with over 105 million homes having access to 
cable modem service. The cable industry is now reaping the economic 
benefits of an infrastructure that is capable of providing broadband 
access to all of our citizens. It is local government's oversight and 
diligence, through the franchise process, that has ensured that our 
constituents are not deprived of these services. Local government is 
the only entity that can adequately monitor and ensure rapid, safe and 
efficient deployment of these new technologies when they are being 
installed on a neighborhood-by-neighborhood level in our local rights-
of-way.

  MANAGEMENT OF THE PHYSICAL RIGHT-OF-WAY IS A CORE FUNCTION OF LOCAL 
                               GOVERNMENT

    Even as technologies change, certain things remain the same. A 
central fact remains' most of the infrastructure being installed or 
improved for the provision of these new services resides in the public 
right-of-way. Elected officials are the trustees of public property and 
must manage it for the benefit of all. We play a critical role in 
promoting competition by ensuring that all competitors have fair access 
to needed physical space and ensure they do not interfere with each 
other. In addition, we impose important public safety controls to 
ensure that communications uses are compatible with water, gas, and 
electric infrastructure also in the right-of-way. Keeping track of each 
street and sidewalk and working to ensure that installation of new 
facilities do not cause gas leaks, electrical outages, and water main 
breaks are among the core police powers of local government. And while 
it seems obvious, these facilities are located over, under or adjacent 
to property whose primary use is the efficient and safe movement of 
traffic. It is local government that best manages these competing 
interests. In any reform of the current law, it is vital that our 
property rights and interests in the management and control of the 
public rights-of-way are respected and preserved.

 TO PROPERLY EXERCISE ITS FIDUCIARY OBLIGATIONS, GOVERNMENT MUST HAVE 
 THE RIGHT TO OBTAIN COMPENSATION FOR PUBLIC PROPERTY USED FOR PRIVATE 
                                  GAIN

    At the same time that we manage the public right-of-way, local 
government, acting as trustees on behalf of our constituents, must 
ensure the community is appropriately compensated for use of the public 
space. In the same way that we charge rent when private companies use a 
public building to make a profit, and the federal government auctions 
spectrum for the use of public airwaves or requires compensation when 
communications towers are located on federal lands, we ensure that the 
public's assets are not wasted by charging reasonable compensation for 
use of the right-of-way. Local government has the right to require 
payment of just and reasonable compensation for the private use of this 
public property--and our ability to continue to charge rent as a 
landlord over our tenants must be protected and preserved.

    SOCIAL OBLIGATIONS REMAIN CRITICAL REGARDLESS OF TECHNOLOGICAL 
                               INNOVATION

    Communications companies are nothing if not innovative. When you 
think back over the course of just the past 100 years, the changes in 
technology are mind-boggling. At the same time, the social obligations 
developed over the last 60 years have endured. I strongly urge the 
Committee to engage in a deliberative process, and take the time 
necessary to engage in dialogue and debate, to ensure that any 
legislative changes adopted this year will be as meaningful 20 years 
from now as two years from now.
    While last year some questioned the need for any regulation of 
Voice over Internet Protocol services, this year the Committee heard 
the chilling story of a family who could not use E911 to reach the 
police on their VoIP phone while a gunman prowled their home. The 
Committee's understanding of the need for regulations has evolved based 
on experience with the technology and careful study and deliberation. 
The same careful study and deliberation is needed with respect to video 
services. Local government believes that federalization of all IP 
services would not serve the public interest, and would violate the 
principle of technology neutrality. Such action would create disparate 
treatment of entities premised solely upon the nature of the service 
being provided, and create an entirely new form of regulatory 
arbitrage. Rather, we believe that like services should be treated 
alike and certainly services that compete with one another in the eyes 
of the consumer should face the same government obligations. Local 
governments want to ensure that we can continue to require that social 
obligations of providers be met, and that consumers are protected.

 CONGRESS MUST TAKE THE TIME TO CONSIDER THE NEW SOCIAL OBLIGATIONS IN 
                              AN IP WORLD

    In the past, we have determined that those who use public property 
for private commercial purposes have an obligation to the ``public 
interest'' in exchange for this privilege. As a result, a sort of 
social contract has evolved with each such entity, based on the 
particular service or technology being utilized. For voice, we 
recognize that E911, universal service, law enforcement access through 
CALEA, are social obligations to be required of companies providing 
voice services. As consideration for the otherwise free use of the 
public spectrum, broadcasters are obligated to serve their communities' 
interests and to provide critical safety of life information on demand. 
For direct broadcast satellite, there is payment for the use of the 
spectrum and a public interest set-aside of 4% of capacity. For video, 
a public interest set aside designates capacity for community channels, 
institutional networks and a requirement to pay rent for the use of the 
public's property. Compliance with these obligations is not 
appropriately left to the marketplace.

           HISTORICAL AND CURRENT ROLE OF SOCIAL OBLIGATIONS

    Thus, I welcome this opportunity to discuss with you the important 
social obligations inherent in current video regulation, and to explain 
why these core functions must be preserved, no matter the technology 
used to provide them. These include the allocation of capacity for the 
provision of public, education and government access channels, 
prohibitions on economic redlining, and a basic obligation that local 
government evaluates and the provider meets the needs of the community, 
including public safety needs.

PEG Channels
    Historically and today, locally produced video programming performs 
an important civic function by providing essential local news and 
information. Under the existing law, local government can require that 
a certain amount of cable system capacity and financial support for 
that capacity be set aside for the local community's use. This capacity 
is most often used in the form of channels carried on the cable system 
and are referred to as PEG for public, educational and governmental 
channels. Once the local franchise authority has established the 
required number of channels and amount of financial support required to 
meet community needs, they then determine the nature of the use, which 
may be mixed between any of the three categories. Public channels are 
set aside for the public and are most often run by a free-standing non-
profit entity. Educational channels are typically reserved for and are 
managed by various educational institutions. Government channels allow 
citizens to view city and county council meetings, and watch a wide 
variety of programming about their local community that would otherwise 
never be offered on commercial or public television. Whether it is 
video coverage of the governmental meetings, information about 
government services or special programs, school lunch menus, homework 
assignments or classroom instruction, the video programming used to 
disseminate this information allows all of us to better serve and 
interact with our constituents. Government continues to make innovative 
uses of this programming capacity as new interactive technology allows 
even better information to be available to our constituents.
    But this is information that many of you know quite personally--for 
instance Congressman Markey has appeared many times as a featured guest 
on access programming on a regular basis throughout the State of 
Massachusetts. And many other members, including Representative 
Dingell, represent communities whose PEG programming has won national 
acclaim. And my own Congressman Bob Beauprez has his own show 
``Washington Report'' distributed on many of the government access 
channels throughout Colorado's 7th Congressional District. Many of you 
and your peers use this vital resource as a means to report back and to 
interact with your constituents at home. Local and state officials also 
use this important medium, and we want to ensure that it continues to 
be available now and in the future.
    It may be possible that through deliberative processes such as this 
hearing, we will identify new technological opportunities to assist us 
in our outreach to our citizens, but I suggest to the Committee today 
that these public interest obligations continue to serve an important 
purpose and must be preserved, regardless of the technology that allows 
us to make the programming available. I hope that you'll join with me 
in calling for the continuation of such opportunities in the new 
technologies that are evolving today. Certainly I should hope that you 
would not follow the tantalizing concept of reducing obligations on 
providers without careful consideration.

Economic Redlining
    One of the primary interests of local government is to ensure that 
services provided over the cable system are made available to all 
residential subscribers in a reasonable period of time. These franchise 
obligations are minimal in light of the significant economic benefits 
that inure to these businesses making private use of public property. 
While there may be those who find this provision unreasonable--we find 
it to be essential. Those who are least likely to be served, as a 
result of their economic status, are those who we need most to protect. 
This deployment helps to ensure that our citizens, young and old alike, 
are provided the best opportunities to enjoy the highest quality of 
life--regardless of income. The capacity that broadband deployment 
offers to our communities is the ability of an urban teen to become 
enriched by distance education opportunities that until recently 
couldn't possibly capture and maintain the interest of a teen (much 
less many adults). And, that's just the beginning--the possibilities 
are endless, as is the creativity of those in local government on 
making the most they can with the least they have.

Public Safety & Community Needs
    Local leaders often focus on the needs of their first responders 
when evaluating community needs. The current law provides that local 
governments may require the development of institutional networks as 
part of the grant of a franchise. This network is specifically for the 
purpose of serving non-residential areas such as government facilities 
including police, fire, schools, libraries and other government 
buildings. This infrastructure is typically designed to use state of 
art technology for data, voice, video and other advanced communications 
services. It has proven effective not only for day to day training and 
operations--but essential in emergencies, including the events of 
September 11, 2001.
    For example, the City of New York uses an INET for distance 
learning among city educational institutions, for city-wide computer 
network connectivity, for criminal justice applications (video 
arraignments), for employee training including first responder 
training, and for ensuring redundant intelligent communications 
capabilities for all of its police, fire and first responder needs. 
This network is constantly being improved upon, but functioned in many 
important capacities during the losses suffered on September 11, 2001. 
This network not only offers capacity for the city all year round, but 
redundancy in times of an emergency.
    Again, many Members of Congress live in communities that have 
required the deployment of these services, and are planning and using 
this infrastructure and the services to protect and serve the needs of 
their citizens. For instance the communities of Palo Alto, California, 
Marquette, Michigan, Laredo, Texas and Fairfax County, Virginia are all 
examples where the local government has determined that use of an 
institutional network is in the best interests of their community.

     NEITHER FRANCHISING, NOR CURRENT REGULATION, IS A BARRIER TO 
                              COMPETITION

    The concept of franchising is to manage and facilitate in an 
orderly and timely fashion the use of property. For local governments, 
this is true regardless of whether we are franchising for the provision 
of gas or electric service, or whether we are providing for multiple 
competing communications services--all of which use public property. As 
the franchisor--we have a fiduciary responsibility that we take 
seriously, and for which we are held accountable.
    I began my testimony commiserating with you about constituent 
demands for better services at competitive prices. As you are no doubt 
aware, our constituents demand real competition to increase their 
options and improve the quality of services. As you know, a GAO study 
showed that in markets where there is a wire-line based competitor to 
cable that cable rates were, on average, 15% lower.-- Please understand 
that local governments are under plenty of pressure every day to get 
these agreements in place and not just from the companies seeking to 
offer service. I know this committee has heard some unflattering 
descriptions of the franchise process. I would like to discuss with you 
the reality of that process.
Franchising is a National Framework with an Essential Local Component
    Franchising is essentially a light touch national regulatory 
framework with local implementation. The 1992 Cable Act authorizes 
local governments to negotiate for a relatively limited range of 
obligations that are imposed upon cable operators. Virtually none of 
these obligations are mandatory. Each one is subject to decision-making 
at a local level. The current legal structure provides for something I 
hope we would all agree is important in this nation--local decisions 
about local community needs are made locally. While some communities 
will require significant capacity for education, government and public 
channels or INET use, others will seek little or none. The ideologies 
and the values of each local community guide their elected leaders.
    And, in many cases, even where the state has determined that a 
state-wide franchise process is appropriate, they require the local 
community and the provider to work out the details, consistent with the 
state guidelines. This is because a one-size fits all approach is not 
the most efficient or reasonable means of achieving deployment of 
communications services. Moreover, a one-size fits all approach can 
penalize communities with differing needs. For example, no one would 
claim that the community of Ann Arbor, MI needs the exact same services 
as Detroit or Kalamazoo, or Mackinaw City in the Upper Peninsula. 
Neither would impose on the other each other's desires--and yet, both 
should have the ability to ascertain their individual needs and work 
with the providers accordingly. Further, in some states where home rule 
has been adopted, the state doesn't have the authority to address these 
issues, as that authority resides at the local level.

Local Franchising is Comparatively Efficient, and Must Be Fair to 
        Protect All Competitors
    Franchising need not be a complex or time-consuming process. In 
some communities the operator brings a proposed agreement to the 
government based on either the existing incumbent's agreement or a 
request for proposals, and with little negotiation at all an agreement 
can be adopted. In other communities, where the elected officials have 
reason to do so, a community needs assessment is conducted to ascertain 
exactly what an acceptable proposal should include. Once that 
determination is made, it's up to the operator to demonstrate that they 
can provide the services needed over the course of the agreement.
    Furthermore, while some of the new entrants have asserted that 
franchise negotiations have not proceeded as fast as they would like, 
it is important to recognize that every negotiation has two parties at 
the table. Some new entrants have proposed franchise agreements that 
violate the current state or federal law and open local franchise 
authorities to liability for unfair treatment of the incumbent cable 
operator vis-a-vis new providers. Some also seek waiver of police 
powers as a standard term of their agreement. Local government can no 
more waive its police powers to a private entity than the federal 
government can waive the constitutional rights its citizens.
    As far as I know, everywhere that Verizon has applied for a 
franchise it insists that the community use Verizon's own model 
franchise, without regard to the terms and conditions of the 
community's incumbent franchise agreement. In other words, Verizon is 
seeking unilaterally to impose its own very aggressive nationwide 
franchise on all local communities. While Verizon may have the right to 
attempt such an approach, it can't fairly complain about delays 
resulting from its own, self-interested negotiating strategy. Rather, 
if Verizon would simply work from the community's existing franchises 
that actually reflect the community's needs and interests, I believe 
they'd find it much faster and easier to obtain a franchise agreement. 
And I can speak from personal experience that this is what Qwest is 
doing in Colorado, and the franchise negotiating process has been both 
easy and timely. Unlike other business contracts that are confidential 
or proprietary, local government franchise agreements are readily 
available as public record documents, so a new provider knows the terms 
of the incumbent's agreement well before they approach a local 
government about a competitive franchise.
    Many states have level playing field statutes, and even more cable 
franchises contain these provisions as contractual obligations on the 
local government. So when a new provider comes in and seeks a 
competitive cable franchise, there is not much to negotiate about. If 
the new competitor is seriously committed to providing as high a 
quality of service as the incumbent, the franchise negotiations will be 
neither complicated nor unreasonably time consuming. Indeed, I recently 
negotiated a competitive cable franchise for the City of Lone Tree, 
Colorado. Qwest Broadband sought a franchise to provide competitive 
video programming through its fiber to the home architecture. Because 
Lone Tree has an existing cable franchise with Comcast, and the City 
cannot grant a competitive franchise that on the whole is more 
favorable to the new entrant, we had a very short and relatively simple 
negotiation.
    Moreover, local government has absolutely no desire to make new 
entrants change their current network topologies to meet the cable 
infrastructure design. Local government's most significant concern is 
that it treat all providers fairly, as required by current franchising 
agreements and by federal law.

Franchising Provides for Reasonable Deployment Schedules
    Nothing in franchising or current federal law requires a new video 
entrant to deploy to an entire community immediately. Local government 
has been negotiating franchise agreements with new entrants for many 
years. In these cases, greenfield developments may have one schedule 
while existing areas are built out over a period of time ranging from 
eighteen months to five years. These same standards apply when an 
incumbent provider is seeking a renewal and needs to upgrade the 
capacity of its system to provide new services.
    By managing the deployment as we do, we protect the incumbent's 
investment in existing infrastructure, we protect the public from 
unnecessary disruption to private business and to their safe use and 
enjoyment of the public right-of-way, and we ensure that new entrants 
are provided with unfettered access in a reasonable and timely fashion, 
while ensuring that they comply with all safety requirements. This 
system has worked well for cable, traditional phone and other providers 
for many years, and is necessarily performed by the local government. 
Congressmen Barton and Stupak successfully fought to maintain the 
federalist, decentralized partnership that has served our country well 
for 200 years when they authored the provisions of the Act which 
preserve to local government this authority. We trust that under their 
continued leadership and guidance these important principles of 
federalism will be maintained.

The Current Framework Safeguards Against Abuse and Protects Competition
    The current framework ensures that all competitors face the same 
obligations and receive the same benefits, ensuring a fair playing 
field. Federal safeguards protect against abuse. Local government is 
generally prohibited from requiring a provider to use any particular 
technology or infrastructure such as demanding fiber or coaxial cable. 
They can require that certain minimum technical standards be adhered to 
and that systems are installed in a safe and efficient manner. Local 
government ensures compliance with the National Electric Safety Code to 
protect against threat of electrocution or other property damage. Local 
rules can also require that signal quality be up to federal standards, 
and that systems are maintained to provide subscribers with state of 
the art transmissions. Similarly, it is local government that inspects 
the physical plant and ensures compliance on all aspects of operations. 
We work closely with our federal partners and cable operators to ensure 
that cable signal leaks are quickly repaired before there is disruption 
or interference with air traffic safety or with other public safety 
uses of spectrum.

Current Law Provides Light Touch Economic Regulation for Cable Services
    While there may be limited regulation of cable rates on the books 
today, telephone companies should celebrate entering the cable 
business, which utilizes the light touch economic regulation they seek. 
That regulation, which is employed in relatively few communities, is 
now purely a consumer protection tool to retard abuse of overcharging 
on basic service and equipment. As limited as the current regime is, a 
recent review of one company's national FCC rate filing disclosed 
overcharges in the amount of $5 million in equipment charges in one 
year to the one million subscribers covered by the review. While the 
regulations may be minimal, their use in protecting subscribers should 
not be lightly tossed aside--and the role of the local government in 
uncovering and prosecuting such protections should be applauded, not 
undermined.
    Finally, where cable operators are subject to effective 
competition, currently defined as 15% DBS penetration, they can use a 
very simple process to petition the FCC to remove themselves from the 
extremely limited rate regulation currently in place. While we do not 
think that the current standard contained in the law and enforced by 
the FCC is adequate, nonetheless, Title VI does not impose anything 
like the regulatory structure applied to telephone services.

                               CONCLUSION

    Local government is enthusiastic about the benefits that Internet 
protocol may offer our constituents. We strongly support competition, 
the rollout of new services, and the economic growth that accompanies 
new technological developments. The history of the Communications Act 
is in some ways, a success story. In a dynamically changing world of 
technology, the Act has restrained monopoly power, extended services, 
required socially responsible actions by providers and supported the 
fundamental democratic and economic underpinnings of our democracy. 
Certainly the importance of choice, competition and opportunity of our 
citizens demands a well conceived and thoughtful deliberative process, 
and not a rush to cure an illness that is yet unproven.
    We also believe that any new national communications policy should 
preserve local government's authority to ensure public health, safety 
and welfare; allow local governments to support important policy goals 
as described here; and enable local governments to serve its 
community's communications needs. What this means is that we are here 
today asking you to preserve our police powers, our ability to control 
and manage of our rights-of-way, and our ability to impose and collect 
taxes and fees necessary to fund our essential services. We ask that 
you continue to support our goals of enhanced economic development 
through the use of new technologies, competitive access to products and 
services and the assurances that all of our citizens and businesses 
will be provided the opportunity to participate in this technological 
revolution. We ask that you remember the important social obligations 
that fall uniquely on the shoulders of local governments to provide for 
homeland security and emergency communications services to and for our 
citizens. To facilitate our communications with our citizens we seek 
legislation that authorizes locally adopted capacity requirements on 
new communications technologies. Finally, while others will speak more 
specifically to this point, we support the ability of local government 
and the citizens they serve to have self determination of their 
communications needs and infrastructure. Where markets fail or 
providers refuse, local governments must have the ability to ensure 
that all of our citizens are served, even when it means that we have to 
do it ourselves.
    In our rush to embrace technological innovation, we, as elected 
leaders, are deeply cognizant of our responsibility to ensure that the 
citizens of our communities are protected and public resources are 
preserved. We engage in deliberative processes, such as this hearing 
today, to be sure that we are accumulating verifiable data and are 
making informed decisions. Local control and oversight has served us 
well in the past and should not be tossed out simply as the ``old 
way.'' This year as the discussion of the delivery of services over the 
Internet includes not just voice but video and other potential 
services, I strongly encourage this Committee to proceed carefully. The 
Committee should continue to continue its excellent work thus far of 
accumulating information and ensuring a strong record in support of any 
decisions to change to the law.
    Thank you. I look forward to answering any questions you may have.

    Mr. Upton. Thank you very much.
    Ms. Munns.

                    STATEMENT OF DIANE MUNNS

    Ms. Munns. Thank you. Mr. Chairman----
    Mr. Upton. I think you have to hit that button.
    Ms. Munns. Technology. Mr. Chairman, Ranking Member Markey, 
and members of the subcommittee, thank you for the opportunity 
to testify today. My name is Diane Munns and I am the President 
of the National Association of Regulatory Utility 
Commissioners. NARUC represents State public utility 
commissions in all 50 States and U.S. territories, with 
oversight over telecommunications, electricity, gas, water, and 
other utilities.
    Since the Telecommunications Act of 1996, the Federal and 
State governments have been involved in a cooperative effort to 
bring local competition to markets. There have been dramatic 
technological changes that have strained in the interstate 
distinctions on which regulations have been based. The State 
commission tasks have also changed from primarily economic 
regulators to facilitating wholesale markets and local 
competition.
    With the changes in technology, we are being asked ``What 
is the function and relevancy of State commissions in today's 
telecommunications market? Is there any role or need for State 
regulation? And won't 50 different regulatory bodies with 
authority over new services impede rather than enhance the 
delivery of services?'' These are fair questions as we must 
continually ask whether government oversight or regulation is 
necessary, and second, what level of government stands in the 
best position to deliver value?
    We believe the States have core competencies that are 
necessary in this new world. State commissions excel at 
delivering responsive consumer protection, assessing market 
power, setting just and reasonable rates with markup power, and 
providing fact-based arbitration and adjudication. States are 
also laboratories of democracy for encouraging the availability 
of new services and fashioning workable remedies for abuses and 
market failures.
    State experiments are often the basis for Federal policy. 
While competitive new technology, such as Voice-over Internet 
Protocol, are hesitant to be classified as telecommunications 
service providers because of regulatory requirements, in order 
to do business and compete against incumbent services, many 
seek the rights that that classification confers: guarantees of 
non-discrimination, interconnection rights to the public switch 
network, rights to interconnect for e911 delivery, local number 
portability, access to pole attachments, receipts of universal 
service funds. While the rights are granted under a national 
framework, enforcement of the rights requires a fact-intensive 
adjudicatory capability, and State commissions offer a timely, 
cost effective forum for resolution of these disputes. The 
State of Maryland handled 40 interconnection and inter-carrier 
disputes last year alone.
    Consumer issues is another area where State capabilities 
are relevant. No one disputes that State commissions or that 
level of government stands in the best position to answer 
complaints or inquiries about service. Our citizens call us, 
not Washington, for information. If services do not meet 
expectations, or when a new abuse arises, we know first. The 
debate goes to the discretion that States should have to 
fashion consumer protections outside a Federal framework or 
outside laws of general applicability. Companies rightfully 
argue that different requirements cause transaction costs that 
impede competition. For example, different bill formats raise 
prices and do not bring additional value to customers. They 
argue for national standards with no discretion at the State 
level.
    I would like to raise the other side of the issue and use 
the example of slamming and cramming. After passage of the 1996 
Act, the new, unprecedented practice of slamming and cramming 
began. States were first aware as their customer hotlines 
became loaded with complaints. States began to experiment with 
remedies for these abuses, which eventually resulted in a 
national approach. This practice is under control today, but 
the answer to consumers had been, we must seek a rule at the 
Federal level before we can act, or act through general 
consumer protection rules, many more people would have been 
harmed individually and it would have taken much longer to 
control this abuse. Confidence in competitive processes would 
also have been harmed. Just last week, my commission 
successfully addressed a novel cable modem hijacking complaint.
    In addition, sometimes raising issues through State 
processes spurs voluntary industry solutions where if hands 
were tied while a lengthy Federal process ensued, incentives to 
find solutions would be significantly reduced. Finally, some 
issues are local and do not need national attention.
    We need to have discussions on processes that can be used 
so States can effectively protect consumers, while not creating 
a patchwork of requirements that slow down competitive 
offerings and offer no value to consumers.
    We look forward to continuing this dialog, and are hopeful 
that the benefits of these new technologies will bring our 
States and believe practical pragmatic regulation must be 
employed at each level of government to achieve that end.
    Thank you.
    [The prepared statement of Diane Munns follows:]

 Prepared Statement of Hon. Diane Munns, Commissioner, Iowa Utilities 
    Board and President, National Association of Regulatory Utility 
                             Commissioners

    Mr. Chairman, Ranking Member Markey and members of the 
Subcommittee, thank you for the opportunity to testify today on behalf 
of the National Association of Regulatory Utility Commissioners 
(NARUC). NARUC represents State public utility commissions in all 50 
states and the US territories, with oversight over telecommunications, 
electricity, gas, water and other utilities.
    Just like the members of this Subcommittee, NARUC's members are 
continually seeking the best solutions to the policy issues that impact 
our nation's evolving telecommunications markets. While there is 
significant diversity of opinion and thought among State commissioners, 
my testimony today is intended to present the consensus positions that 
have emerged from NARUC's internal discussions and also highlight the 
challenges we face together as Federal and State policymakers seeking 
to protect consumers, facilitate competition, promote universal service 
and otherwise encourage a reliable, dynamic, effective communications 
system for the 21st Century.

Legislative principles and federalism:
    In response to congressional interest in reexamining the Telecom 
Act, NARUC formed a Telecom Legislative Task Force in 2004 and approved 
a resolution at our February 2005 meeting suggesting key features we 
believe any revision of the Act should include:

 Promote innovative platforms, applications and services in a 
        technology-neutral manner;
 Consider the relative interests and abilities of the State and 
        federal governments when assigning regulatory functions.
 Preserve the States' particular abilities to ensure their core public 
        interests;
 Preserve customer access to the content of their choice without 
        interference by the service provider;
 Ensure timely resolution of policy issues important to consumers and 
        the market;
 Protect the interests of low income, high cost areas, and customers 
        with special needs;
 Provide responsive and effective consumer protection; and
 Focus regulation only on those markets where there is an identified 
        market failure.
    An area of particular concern has been the evolving nature of 
federalism. While telephone customers have been making calls across 
state lines since at least 1884, the role of State commissions has 
evolved over time to match the structure of the market and the needs of 
consumers. For many decades, a primary State commission task was to 
restrain the market power of a single national phone company 
(presumably with many centralized functions) by holding down local 
rates, preventing harmful cross-subsidies and requiring equitable 
build-out of facilities. More recently, States played a central role in 
facilitating wholesale markets for incumbent phone loops and other 
essential facilities for local competition, and developed sophisticated 
consumer hotlines to provide a human voice and individual attention to 
frustrated consumers.
    As the communications market shifts again, NARUC has explored a 
pragmatic analysis that looks to the core competencies of agencies at 
each level of government--state, local and federal. While some State 
oversight roles will undoubtedly diminish where local competition 
grows, others will remain essential, especially as large parts of the 
market, including VOIP, still seek access to the Public-Switched 
Telephone Network (PSTN). In many cases, State jurisdiction need not 
rely on a readily separable ``intrastate'' component of a service. For 
example, effective consumer protection depends largely on where the 
consumer is domiciled, regardless of whether calls are placed to in-
state or out-of-state destinations. Requests to interconnect depend on 
where the relevant facilities are located. Requests to receive 
universal service funds or to be designated as an Eligible Telecom 
Carrier (``ETC'') for such funds depend on the geographic study area 
where service will be provided.
    Ultimately, decisions about jurisdiction and oversight should be 
linked not to the particular technology used, but to the salient 
features of a particular service, such as whether it is competitive and 
how consumers and small businesses depend on it. States commissions 
excel at delivering responsive consumer protection, assessing market 
power, setting just and reasonable rates for carriers with market 
power, providing fact-based arbitration and adjudication. States are 
also the ``laboratories of democracy'' for encouraging availability of 
new services and meeting policy challenges at the grassroots level. An 
effective, pragmatic approach to federalism, in the IP world or 
otherwise, should recognize those strengths.

Consumer protection:
    Even in an IP world, consumers will hesitate to depend solely on 
faraway federal agencies for consumer protection when they encounter 
disputes or frustrations with their service provider. State commissions 
operate sophisticated consumer hotlines that handle tens of thousands 
of consumer complaints every year, providing a live human voice on the 
other end of the line and individualized assistance each time there is 
a problem. In many case, our representatives need only provide an 
explanation to address a consumer's concerns, letting them know what 
``SLC'' stands for on their bill or explaining an E911 assessment's 
purpose. Failing that, a State commission can mediate with the carrier 
or, if necessary, adjudicate a dispute.
    Because we are on the proverbial front lines by handling so many 
complaints, State commissions are often the first to hear about new 
abuses or particular business practices that distress consumers. 
Effective consumer protection requires the authority and the 
flexibility to address those concerns as they arise. This was the case 
with ``slamming'' and ``cramming'' on phone bills, which first became 
an issue at the State level and eventually became the subject of 
federal rules. A recent internal survey of NARUC's Consumer Affairs 
Committee revealed that State commissions in just 20 states handled 
over 233,000 complaints in 2004.
    In some cases, VOIP services could actually raise new issues. For 
example if a customer of an unaffiliated VOIP provider experiences a 
service outage, and the VOIP provider and broadband provider are 
pointing fingers at each other, who will sort it out? The FCC is ill-
equipped to remedy individual service outages and the customer is 
hardly in the position to solve it herself. State commissions have 
handled similar provisioning issues between CLECs and ILECs for years.
Emergency dialing--911 and E-911:
    As more families replace their traditional phones with VOIP service 
to take advantage of the pricing advantages and features, it is 
particularly important to make sure these services include reliable 
emergency dialing functionality that will route calls to the nearest 
Public Safety Answering Point (PSAP), indicate the caller's location 
and allow the 911 operator to call back if the call is disconnected. 
Such services should also be subject to the fees that support the 
modern PSAP network, especially as PSAPs undertake massive technology 
upgrades to accommodate IP and wireless services.
    Unfortunately, thanks to a series of legal challenges and the FCC's 
ruling last year in the Vonage petition, there is currently no 
requirement for VOIP services to provide a 911 or E911 solution, and 
the right of VOIP services to interconnect to PSAP trunk lines is 
unclear. NARUC is encouraged by the progress that VON Coalition members 
and other VOIP providers have shown in beginning to provide 911 
functionality, and we are engaged with both the industry and the public 
safety community in clearing away obstacles to a ubiquitous E911 
deployment.
    Ultimately, the appropriate regulatory treatment and classification 
should allow VOIP providers to avail themselves of the interconnection 
and arbitration procedures in Section 252 of the Telecom Act, with 
timely arbitration and reasonable pricing of those network elements 
necessary to provide E911 service, such as access to the selective 
router and appropriate databases.

The future of competition:
    When Congress considered VOIP legislation in 2004, many suggested 
that competition oversight was unnecessary wherever Internet Protocol 
was used, averring that to broadband providers, ``a bit is a bit.'' 
Unfortunately, the opposite proved true earlier this year when Madison 
River Communications deliberately blocked ports for customers of Vonage 
Holdings Corporation. The March 2, 2005 issue of Internet Week quoted 
Vonage CEO Jeffrey Citron as saying that:
        ``The advanced features of network analyzers already allow 
        administrators to look not only at what types of packets are 
        traversing their networks, but into the actual content of the 
        packets.''
    Far from anonymizing competing providers, IP technologies may 
actually increase the ability to discriminate against particular 
traffic, or favor a partner's bits over those of an unaffiliated 
provider. While the FCC acted quickly with an enforcement action and a 
consent agreement with Madison River, such redress was only available 
because the company was offering a DSL service, and would not 
necessarily be available for a cable modem provider. In fact, if DSL is 
ultimately classified as an information service, such remedies will 
become even weaker.
    Many of us are putting high hopes on all these new technologies and 
services to bring fresh competition to telecommunications. At the same 
time, the industry is experiencing a breathtaking run of mergers, with 
firms like AT&T and MCI--once bastions of local competition--now being 
absorbed by the Baby Bells they competed against, and there is 
significant consolidation in the wireless and cable industries as well. 
With so much restructuring, market power could increase in some 
geographic markets, even as it decreases in others. State commissions 
have extensive expertise in assessing market power in a local basis, 
providing relief where appropriate but able to reimpose oversight in 
the event of ``backsliding.''
    If there is one thing we know, it is that the communications 
landscape of ten years from now will look vastly different than 
today's. Broadband connections might become commoditized as consumers 
seek their voice and other value-add services from unaffiliated firms 
like Vonage, Pulver, Skype and Microsoft, or those same providers could 
find themselves squeezed out by facilities-owners' ``bundles'' that 
include voice as a no-cost fringe benefit. Wireless broadband 
technologies might democratize the last mile and eliminate the 
traditional barriers to competition, or we could be left with a 
powerful duopoly that new entrants are hard pressed to compete against. 
And even as affluent early adopters flock to sophisticated new 
services, many consumers will continue to prefer a simple, basic phone 
connection that is not a part of any ``bundled'' package.
    In all of this, it falls to policymakers not to forecast the next 
wave of innovation but to look out for consumers and set fair rules of 
the road that foster competition and allow the market to allocate 
resources efficiently. Our task is to be both optimistic and vigilant, 
letting innovation take its course, but demanding that our constituents 
are protected. While competitive VOIP companies are hesitant to be 
classified as ``telecom service'' providers, many are seeking the 
rights that Title II of the Telecom Act confers on telecom services:

 Guarantees of non-discrimination;
 Interconnection rights to the PSTN;
 Rights to interconnect to PSTN trunk lines to Public Safety Answering 
        Points (PSAPs);
 Access to NANP telephone numbering resources;
 Local number portability;
 Access to pole attachments and rights-of-way; and
 Receipt of Universal Service Funds.
    Many of these rights are adjudicated or otherwise facilitated by 
State commissions. In fact, if VOIP providers are unable to avail 
themselves of the State commission arbitration procedures of Section 
252 of the Telecom Act, they will actually have inferior rights to 
those of their traditional competitors.

Universal service:
    Voice over IP services also benefit from our nation's ubiquitous 
phone network supported by State and Federal universal service programs 
over the past several years. As a general matter, the only VOIP 
services that fetch a fee in the markeplace are those that exchange 
traffic with the PSTN--the ones that don't are usually free. In other 
words, at least in today's market, the majority of VOIP services are 
really offering a new way to call and be called by the traditional PSTN 
phones that most of us still use. That is why NARUC supports a broad 
and equitable contribution base to state and federal universal service 
programs so all service providers that rely on a ubiquitous telecom 
network--including VOIP providers--help maintain the universality of 
the network, with a similar spectrum of services at comparable rates in 
urban and rural areas.
    State commissions help administer the federal USF, by designating 
Eligible Telecommunications Carriers (ETC) in each state, by regulating 
the cost recovery of many rural carriers that depend heavily on 
universal service, and by offering policy input through the Federal-
State Joint Board on Universal Service. About 24 states also run their 
own intrastate universal service funds, addressing about $2 billion in 
high cost, low income and other needs that would otherwise be short-
changed by federal formulas, or that simply don't require the 
interstate transfers that the federal USF was created to accommodate. 
Any universal service reform should either preserve those State funds 
or find a way to make consumers in those 24 states whole. By limiting 
the fees to customers domiciled in a particular state, a State fund can 
localize both the burden and the benefits, as opposed to further 
burdening customers in Mississippi or Arkansas to meet needs in 
California or New York.

Intercarrier compensation:
    VOIP services must also pay their fair share, just as all other 
carriers do, when exchanging traffic with the PSTN. NARUC supports 
efforts to develop a rational, technology-neutral intercarrier 
compensation system that includes all carriers, including VOIP 
providers, avoids regulatory arbitrage and allows carriers to recover 
an appropriate portion of network costs. At the same time, State 
commissions should retain a role in this process reflecting their 
unique insight as well as substantial discretion in developing retail 
rates for carriers of last resort. NARUC is leading an intensive 
dialogue among the states and with the industry stakeholders to seek a 
consensus solution.

Video over IP
    Because ten State commissions have jurisdiction over cable 
franchising, NARUC is in the process of examining the appropriate 
regulatory treatment of the IP video offerings by SBC and Verizon. As a 
legal matter, the individual State commissions will make determinations 
about whether those services must comply with Title VI franchising 
requirements as appropriate. As a policy matter in the context of 
federal legislation, NARUC members will go back to first principles, as 
we have with Voice over IP, and examine how to encourage innovation 
while preserving core public interests.
Conclusion:
    We look forward to the continuing dialogue with the members of this 
Subcommittee, with federal regulators and with all the stakeholders 
about the future of telecom regulation. I am happy to answer any 
questions from membrs of the Subcommittee.

    Mr. Upton. Thank you. Mr. Davidson.

                STATEMENT OF CHARLES M. DAVIDSON

    Mr. Davidson. Thank you, Chairman, Ranking Member Markey, 
representatives. It is an honor to be here today, and I 
appreciate the opportunity.
    During these discussions, you often hear that the 1996 Act 
was a failure and it needs to be reformed. I don't think it 
should be viewed as such. Congress should be proud of the 1996 
Act and stand behind what it did. Competition is here. It may 
be outside the context of the ILEC versus CLEC competition 
anticipated, but it is here.
    But for the 1996 Act, we might not have seen DSL come off 
the Bell's shelves as quickly as it did. We might not have seen 
the tremendous investment in the cable infrastructure that we 
have seen. We might not be the beneficiaries of probably the 
most robust, dynamic, competitive wireless network in the 
world.
    The 1996 Act had a purpose and many positive effects, but 
the world in 2005 is very different from the world even in 
2000. Just since 2000, the telecom sector, as you know, has 
lost some $2 trillion in market capitalization, and hundreds of 
thousands of jobs. Other platforms are aggressively competing 
with wire line for market share. Estimates are that by 2006, 
cable captures 7 percent of wire line customers, and 20 percent 
over the next decade. On the flip side, traditional telecoms 
have a very real potential to compete with cable and the 
delivery of video. All of this is great news for consumers and 
all of this might not have occurred but for the Act.
    Getting the model right going forward is critically 
important to the economic and social advancement of the Nation. 
One, it is important to both--it is important to help the 
telecom sector recover, and it is also important to encourage 
these new entrants to come into the market and deliver their 
services and invest in these new technologies for consumers. 
Regulatory reform means jobs. The wireless industry generates 
more than $9 million a year in payrolls. We need to patent that 
formula, somehow. Getting the model right means billions of 
dollars in new capital spending and new choices for customers. 
Getting the policy right means a stronger America.
    In deregulating VoIP in Florida and in providing that 
broadband shall not be subject to a patchwork of local 
government regulations, Florida is hoping that Brighthouse 
Cable will compete with Verizon in the voice segment, and that 
Verizon will compete with Brighthouse in the video segment. 
This competition that we hope for in this building out of 
networks is extremely capital intensive. Cable has invested 
some $95 billion in the past decade to build out its networks. 
Verizon is currently spending over $60 million in 1 year alone 
to build out fiber networks to bring video to customers in 
Florida. Wireless has invested some $175 billion in its 
networked, and reinvests, as CTI estimates, about $20 billion a 
year for upgrades.
    We need a new regulatory paradigm. The current model is 
focused on the wire line market, on the ILEC versus CLEC 
debate. The rules distinguish between telecom and everything 
else. Existing rules that served a very valid purpose when the 
market was just telecom and the providers were just the phone 
companies doesn't work in this new market.
    In crafting sort of a new regime, the first question that 
often arises is ``What are the respective roles of State and 
Federal Government?'' I respectfully submit that this is not 
the first question to ask. Far more often than I hear the 
question of ``How do we maximize consumer welfare? How do we 
bring these new technologies to customers?'' I hear the 
question ``How do we make sure States continue to have a role 
in regulating these issues?'' States will have a role. They 
should have a role. But our first concern ought to be bringing 
these new technologies to customers.
    Chairman Upton, despite Michigan beating Florida in the 
broadband survey, and despite Michigan actually kicking the 
Gators' tail a few weeks ago in lacrosse, you represent----
    Mr. Upton. We won a big ballgame against Florida.
    Mr. Davidson. I am leaving that out.
    But you represent me as a citizen of the United States. 
Representative Stearns represents me. Representative Markey, 
you represent me. We are not just a loose coalition of States; 
we are a Nation with sort of a shared interest in economic and 
social advancement. And just like with the airlines industry or 
the shipping industry or the railroad industry, we truly need a 
national policy.
    Some of the core ingredients that ought to be included in 
that national policy, a clear and simple quid pro quo, an 
articulation of what a social contract is to provide certainty 
to market participants, and a clear benchmark for regulators. A 
straightforward social pact might be, if you use North American 
numbering resources, for example, you are going to be subject 
to certain obligations. It doesn't matter whether you are pure 
VoIP, cable telephony, wire line, wireless. If you use a North 
American number, you are going to have to meet certain social 
obligations. That keeps the model platform agnostic, and 
everyone clearly knows, okay, if we go get a number, we are 
going to have this universal service commit, we are going to 
have an inter-carrier comp issue, we are going to have to 
provide 911. There are certain things we do.
    We also need a truly national set of rules to govern terms 
and conditions of service. A patchwork of potentially 50 
different State rules in this emerging IP market will deter 
some entrants from entering the market, and it will also cost a 
lot of money for folks already in the market to comply with 
those rules. States have a lot of good ideas. Let us 
nationalize those ideas and bring them forward at a Federal 
level.
    And finally, one final point, if I may, tax reform. The 
sectors that are driving the economy are being taxed at double-
digit rates. Let us put some of this money back in the hands of 
consumers. Let us do something to create jobs and encourage 
investment and innovation.
    Thank you, Chairman.
    [The prepared statement of Charles M. Davidson follows:]

Prepared Statement of Charles M. Davidson, Commissioner, Florida Public 
                           Service Commission

                            I. INTRODUCTION

    Thank you, Mr. Chairman, for inviting me here to testify. I am a 
Commissioner at the Florida Public Service Commission, the agency with 
regulatory jurisdiction over Florida's investor-owned telephone, 
electric, natural gas, and water utilities. My comments here today are 
those of an individual Commissioner. I am also before you as a consumer 
who has not had telephone service for over a year. I use a wireless 
phone, VoIP service over my cable modem, Blackberry data service and 
wireless broadband when traveling--but I have no telephone.
    I would like to thank the Committee for its ongoing efforts to 
ensure that consumers in Florida and across the country benefit from 
policies to promote the development and deployment of advanced 
communications technologies. I would also like to thank the Florida 
delegation represented on this Committee for its consultation with the 
Florida Commission on energy and communication issues important to the 
State of Florida.
    Under the leadership of Governor Bush and the Florida Legislature, 
Florida leads the nation in policies focused on bringing new 
technologies to all Floridians. Florida was the first state in the 
nation to provide that VoIP shall not be subject to regulation. Florida 
was the first state in the nation to provide that broadband, regardless 
of the provider or platform, would not be subject to a patchwork of 
local government regulations. As a result of forward looking policies, 
companies like Vonage as well as cable companies are competing with 
established telecom providers for a share of the voice market. On the 
video side, Verizon is gearing up to compete with cable though its 
build out of a robust video over fiber network in central Florida. 
Competition is occurring in Florida, and it is occurring outside of 
``the regulated space.''

        II. THE 1996 ACT: INSIDE AND OUTSIDE THE REGULATED SPACE

A. The Traditional Telecom Sector
    The U.S. Chamber of Commerce recently reported on the state of the 
wireline telephony sector. From March 2000 to July 2004, market 
capitalization in the telecom sector plummeted from $1,135 billion to 
$375 billion (a 67% decline). The communications equipment-
manufacturing sector experienced a 74% decline in market capitalization 
(from $1,282 billion to $338 billion) for the same period.1 
Some 380,500 jobs were lost between March 2001 and May 2004 in telecom 
service, Internet service, and equipment manufacturing.2 The 
Yankee Group projects that U.S. landline revenue will fall from $63.2 
million in 2004 to $47.4 million in 2008.3
B. Innovation, Investment and Competition Outside the Box
    Other sectors are flourishing under the regulatory policies 
established by Congress. The extent of innovation and investment 
``outside the box'' is perhaps best demonstrated by the success of the 
wireless industry. The industry has, for example: invested more than 
$174 billion (1983 to 2004) in wireless networks and reinvested some 
$20 billion annually for upgrades and expansions;4 directly 
employed 226,016 people as of December 2004 and generated more than $9 
billion in annual payrolls; 5 and increased subscribership 
to over 182 million while reducing per minute prices.6
    While occurring outside the ILEC vs. CLEC competition envisioned by 
the 1996 Act, competition is occurring. Research firm IDC predicts, for 
example, that by 2009, some 27 million consumers will subscribe to 
VoIP.7
    Cable is competing with traditional wireline telephony. Raymond 
James reported that Wall Street ``expects between 1.5 million and 2.5 
million cable telephony net adds by the public MSOs in 
2005.8 Goldman Sachs estimates that telephone companies 
could lose 7% of residential lines to cable by 2006, and nearly 20% in 
the next 10 years.9 Another estimate is that more than half 
of all 110 million households in the U.S. will have the option of 
getting phone service from their cable companies by the end of 2006 and 
that by 2008, cable companies will be selling phone service to 17.5 
million subscribers.10
    Wireless is also competing with wireline telephony. According to 
the FCC's September 2004 report, the number of mobile wireless 
subscribers nationwide has grown 5% since 2002, with subscribership at 
54% of the U.S. population as of December 31, 2003.11 In 
contrast, local exchange companies saw a 6.1 million drop in access 
lines nationwide in 2003.12 According to a 2004 study issued 
by In-Stat/MDR, 14.4% of U.S. consumers currently use a wireless 
telephone as their primary telephone. Of the remaining 85.6%, 26.4% of 
those would consider replacing their wireline telephone with wireless 
service. In-Stat/MDR predicts that by 2008, nearly a third of all U.S. 
wireless subscribers will no longer have a landline in their 
homes.13
    Wireless is also competing for a share of the enterprise market. In 
a recent In-Stat survey of more than 300 mid-size businesses and large 
enterprises, nearly \1/4\th of respondents stated that their firm had 
already deployed wireless VoIP. Approximately \1/3\rd of the 
respondents indicated that their firm was planning or evaluating the 
implementation of the technology within the next six to 12 
months.14
    Internet-enabled communications are also competing with traditional 
voice. A 2003 J.D. Power and Associates study found that among high-
speed Internet users, instant messaging displaced 20% of local calls, 
and email displaced 24% of such calls. Among dial-up Internet users, 
the study concluded that instant messaging displaced 18% of local 
calls, and email displaced 23% of local calls.15

                III. THE BENEFITS AND COSTS OF BROADBAND

A. The Importance of Broadband
    Broadband is critically important to the economic well being of the 
country--and of the states. Like with many states, Florida's economic 
and social development--including its skills and job training, 
education and health care services,16 and the recruitment 
and retention of businesses--is increasingly linked to an advanced 
communications infrastructure.
    In their seminal study, Crandall and Jackson conclude that 
ubiquitous adoption of current generation technologies would generate 
some $63.6 billion in capital expenditures over the next 19 
years.17 They further estimate a cumulative increase in GDP 
of $179.7 billion and an additional 61,000 jobs created. The impact of 
more advanced technologies, such as fiber to the home, would generate 
an additional net $82.8 billion in capital spending ($4.34 billion per 
year) for a total of $146.4 billion in new capital spending over 19 
years, which would result in a total of 140,000 new jobs. Broadband 
enabled activities have the potential to spur new rounds in capital 
spending (on research, development, and deployment) and consumer 
spending (on content, software and applications, and devices).
B. Bringing Broadband to Consumers Takes Capital
    Realization of broadband's full economic potential will require 
billions in additional up-front investments in technology, networks, 
and deployment. To upgrade systems and make cable broadband service 
more widely available to homes passed by its network, cable operators 
have invested almost $95 billion between 1996, when cable pricing was 
deregulated, and 2004.18 ILECs are responding to FCC rulings 
that new build would not have to be unbundled or shared with 
competitors by making significant investments in fiber. For example, 
Verizon states that is spending an estimated $3 billion on fiber 
deployment in 2004 and 2005. In 2004 alone, Verizon announced that it 
was spending $60 million to deliver fiber technology to customers in 
Florida.19 Additionally, SBC has recently announced that it 
is accelerating its fiber deployment and plans to invest approximately 
$4 billion to $6 billion to deploy some 38,800 miles of fiber to reach 
19 million homes by the end of 2007.20
    Estimates by research firms on the potential for additional 
broadband investment are abundant. For example, one such estimate by 
InStat concludes that a $3 billion investment would be necessary to 
deploy a WiMAX-based network that reaches 98% of U.S. 
homes.21
C. Florida's Focus on Promoting Competition
    Florida is promoting the deployment of new technologies in the 
state. In addition to not regulating wireless carriers,22 
Florida was the first state in the nation to deregulate 
VoIP.23 The Legislature also freed broadband and information 
services generally from a potential patchwork of local government 
regulation that could hinder its deployment.24
    Currently, the Florida Legislature is considering companion bills 
in the House and Senate 25 to further promote advanced 
communications technologies in the state. If ultimately enacted into 
law, the legislation would expressly:

 Encourage consistency with federal law.
 Exempt broadband services, regardless of the provider, platform or 
        protocol, from state commission jurisdiction.
 Ensure that emerging technologies like VoIP, while not subject to 
        traditional regulation, are ``subject to [Florida's] generally 
        applicable business regulation and deceptive trade practices 
        and consumer protection laws, as enforced by the appropriate 
        state authority [or in court].''
    Floridians are the beneficiaries. For example, over 20 wireless 
competitors serve over 10 million Florida subscribers,26 and 
77% of Floridians have a choice of five or more wireless carriers. 
Wireless carriers employed 13,893 Floridians in 2003. VoIP providers, 
including Vonage, AT&T, and Bright House Networks are competing with 
traditional telecommunications providers. In terms of broadband access, 
Florida had over 1.76 million high-speed lines in service to residences 
and small businesses by December 2003--up from 254,000 lines just three 
years prior.27 In 2004, Verizon began deploying fiber to the 
premises (FTTP) technology. Verizon plans to pass more than 100,000 
Florida homes and small businesses, and is set to launch its first 
television services on its new FTTP network this year.28
    Florida's approach provides a model worthy of consideration at the 
national level. In exempting new technologies from old regulation, 
Florida has paved the road for delivering new technologies to 
consumers. At the same time, providers of new technologies remain 
subject to the state's aggressive, generally applicable consumer 
protection regime.

             IV. A NEW, NATIONAL POLICY FRAMEWORK IS NEEDED

    Policymakers should avoid casting the issue as one of states' 
rights versus federal preemption. State and federal policymakers are 
pursuing the same core goal--that being to promote investment in the 
development and deployment of broadband infrastructure.
    At a time when some states are focused on harnessing the benefits 
of competitive new technologies for its consumers, other states are 
attempting to burden the new technologies with old rules designed to 
forge competition in the monopolized wireline telephony market. Fifty 
states with potentially fifty different regulatory policies will not 
further that goal.29 A new, national policy is needed to 
both (a) help the telecom sector recover 30 and (b) ensure 
that consumers reap the benefits of advanced technologies.
A. IP Challenges the Existing Regulatory Regime
    Current telecommunications regulation has its genesis in the 
economic regulation of monopoly providers of wireline telephony. 
Economic regulation acts as a proxy for competition. The 1996 Act 
intended to spur competition by encouraging CLEC market entry. The 
regulatory approach is fundamentally grounded in a wireline paradigm, 
presupposes that the relevant market is local telephony, and is focused 
on the terms/conditions of market access. Consumer choice is a function 
of the ILEC vs. CLEC competition. The Act is not focused on other 
categories of competitors or technologies that may be competing with 
traditional telephony.
    Further, under existing law, classification of a service as 
``telecommunications'' or ``information'' is critical in that it 
determines the rights and obligations to which a provider will be 
subjected. In the IP world, the line between ``telecommunications 
services'' and ``information services'' is murky at best. VoIP 
represents the convergence of voice and information. Some would force 
IP-enabled voice services into the ``telecommunications'' service box 
or some similar definition under state law. In doing so, they are 
seeking to preserve a regulatory model that is increasingly obsolete 
and that was not intended to encompass such technologies.
    Uncertainty as to the regulatory treatment of IP-enabled 
technologies, and efforts to pigeonhole new technologies into old 
regulatory constructs, will serve primarily to delay the development 
and deployment of these technologies for consumers.
B. Rationales for a National Policy Framework
1. Intent of the 1996 Act
    A national policy framework for IP-enabled services (and broadband 
generally) is fundamentally consistent with (if not required by) the 
Telecommunications Act of 1996, which was designed ``to provide for a 
pro-competitive, de-regulatory national policy framework designed to 
accelerate rapidly private sector deployment of advanced 
telecommunications and information technology and services . . 
.'').31
2. Interstate Nature of the Market
    IP-enabled technologies and platforms exist and function without 
regard to state boundaries and as part of a national (indeed, global) 
communications infrastructure. Such technologies are ``borderless'' in 
nature. Unlike with the circuit-switched network, which developed 
within states and then between states, traffic over an IP network does 
not follow any prescribed geographic path. IP traffic cannot be readily 
defined as within the jurisdiction of states.32 The 
interstate nature of IP-enabled services and the need to avoid a 
patchwork of potentially fifty different state policies argue strongly 
for regulation at the national level.
1. Costs for Consumers of a State-Centric Approach 33
    National regulation of IP-enabled services would provide greater 
regulatory certainty than would a patchwork of fifty potentially 
different state policies. An industry that faces potentially divergent 
or unknown regulatory regimes would have less of an incentive to invest 
risk capital than would an industry facing a more uniform, predictable 
national policy. With Congressional assurances of regulatory clarity, 
VoIP providers would likely be more willing to expand services, even in 
states like California that are considered riskier regulatory 
environments
    A patchwork of various state regulations all aimed at the same 
service would likely result in additional costs to the consumer. If 10 
of the 50 states each have good (but different) ideas for regulation 
and each of those 10 good approaches would cost on average $2M for the 
providers to comply, the overall costs of service would increase. This 
additional level of state regulation would have resulted in $20M in 
additional regulatory costs that will, in a competitive market, be 
socialized amongst the customers of the services. The costs of state 
specific regulation by Florida, California and New York would likely be 
borne by consumers in every jurisdiction represented in Congress.
C. Core Components of a National Policy
1. No Economic Regulation
    Economic regulation is a proxy for competition. It includes the 
regulation of prices and of other terms and conditions of service that 
would otherwise be determined by the market. While economic regulation 
of monopoly providers of a service is certainly warranted, such 
regulation is a certain disincentive to investment in competitive 
markets. Unlike the market for wireline telephony in 1996, the market 
for IP-enabled services is competitive. Even in the face of regulatory 
uncertainty, IP-enabled technologies are spurring robust price and 
service competition from a host of established firms and new entrants 
alike--and this competition is occurring across platforms. Consumers 
have far more choices than existed 5 years ago.
2. Focus on Social Regulation
    While IP-enabled technologies should not be subject to economic 
regulation, ``social regulation'' is necessary to meet key societal 
objectives that may not be fully or properly addressed by the market 
(e.g., 911/e911).
    Uncertainty currently exists as to the scope of providers/
technologies to which social regulation would apply. In considering the 
appropriate regulatory regime, Congress has the unique opportunity to 
articulate a clear quid pro quo for the regulation at issue. One 
technologically agnostic option might be for Congress to provide that 
any provider seeking to use North American Numbering Plan resources is 
subject to some universe of generally applicable social regulations as 
articulated by Congress (or the FCC by delegation). Tying social 
regulation to the use of a public resource would (a) provide certainty 
to providers relying on public numbering resources to deliver services, 
(b) offer a safe harbor to entities that are not relying on such 
resources, and, perhaps most importantly, (c) provide a clear benchmark 
for use by state and federal policymakers.
3. Regulatory Parity and Technologically Agnostic Rules
    Competition is not sustainable in the long run where substitutable 
products are subject to asymmetrical regulation. In deciding where to 
invest, the market will compare the anticipated return on capital 
invested in a more regulated sector to capital invested in a less 
regulated sector. A rational investor seeking a maximum return on its 
investment would, all else equal, choose the less regulated sector.
    As such, the ultimate policy regime should not discriminate based 
on the underlying technology or platform used for the delivery of 
services: technological parity should result in regulatory parity. From 
the vantage of the consumer, there is no reason for regulating 
substitutable products differently. If, for example, Video over IP and 
Video over FTTH are substitutes from a consumer vantage, a similar 
regulatory regime should apply. From the vantage of the market, 
regulatory symmetry works to send accurate price signals, maintain a 
level playing field, and promote competition based on the merits. The 
best way to ensure regulatory parity is for Congress to set national 
policy with respect to competing technologies.
    As Congress considers a rewrite of the 1996 Act, two avenues exist 
for achieving regulatory parity: ``regulating up'' or ``deregulating 
down.'' The market for IP-enabled services is competitive, and 
consumers have more choices than at any point in the past. As such, 
regulating similarly situated platforms down to the point of regulatory 
symmetry would likely do more to encourage investment and bring new 
choices to consumers than would regulating up.
4. Jurisdiction & Process: Cooperative Federalism
    In assigning jurisdictional responsibilities, future legislation 
ought to reflect that states and the federal government share certain 
interests and responsibilities. For example, both levels of government 
share an interest in ensuring a ubiquitous, reliable and affordable 
911/e911 emergency services network. One cannot credibly argue, 
however, that the 50 states should have independent jurisdiction to set 
911/e911 standards. Similarly, the states and the federal government 
share interests in protecting consumers against unscrupulous practices, 
in ensuring that networks interconnect, and in curbing abuses of market 
power.
    The issue is not one of states versus federal rights and should not 
be cast as that. The issue is one of articulating a rational policy 
framework such that core public policy objectives are met, providers 
are not deterred from investing in and deploying new technologies to 
consumers, and consumers are protected against unscrupulous practices.
    Federal statutory reform should focus on the skill sets of state 
and federal governments before delineating regulatory duties. The 
nation--its consumers as well as those investing in new technologies--
would be best served by a set of national rules that could be 
aggressively enforced by the states (or federal agencies as the case 
may be). States have numerous ``enforcement'' vehicles already 
established. For example, states have substantial experience enforcing 
federal rules that provide for interconnection and intercarrier 
compensation, rules that establish 911 obligations, and rules that 
prohibit slamming or cramming. Going forward:

 Federal law could establish consistent requirements for platform 
        interoperability and interconnection, with state commissions 
        serving as arbitrators of disputes.
 Federal rules could establish the parameters for the use of North 
        American Numbering Plan resources, while vesting states with 
        enforcement authority (e.g., denial of right to use numbers 
        upon findings of misconduct).
 Comprehensive national truth-in-billing rules could be policed by 
        state commissions (or other bodies deemed appropriate by a 
        state, such as a state Attorney General).

                          V. KEY POLICY AREAS

A. Consumer Protection
    States and the federal government share a common goal of ensuring 
that consumers are protected against unscrupulous companies and 
fraudulent practices. That shared goal could best be met by a national 
consumer protection regime with the following elements: (a) national 
rules specifically relating to the terms and conditions of 
communications services; (b) joint state and federal enforcement of 
such rules; (c) continued application of ``generally applicable'' state 
consumer protection, fraud and deceptive business practice laws; and 
(d) recognition of industry self-policing.
    National rules would prevent potentially conflicting (albeit well-
meaning) state regulations. For example, California, in a consumer 
``bill of rights'' issued by the state utility commission, dictated the 
font size to be used in the contracts of national providers. Twenty 
states requiring twenty different font sizes would be costly for 
consumers. Requiring that the contracts of national providers comply 
with a patchwork of state-specific terms and conditions would 
substantially increase transaction costs (which, in a competitive 
market, will undoubtedly be paid by consumers). Further, having to 
comply with potentially 50 sets of state-specific rules may simply 
deter some providers from even offering service in certain areas. In 
either case, the consumer loses.
    Joint state and federal enforcement of national rules would ensure 
that the consumers have institutions in their states to which they can 
turn for assistance. As states have existing enforcement mechanisms 
(e.g., to address cramming and slamming), the enforcement of consumer 
rights claims should, to the extent practicable, occur at the state 
level. Burdening a state consumer with a requirement to enforce his or 
her claim in a federal forum would be unreasonable in most instances.
    Notwithstanding national rules focused on the communications 
sector, states should continue to have the right to continue to enforce 
their generally applicable consumer protection, anti-fraud, and 
deceptive trade practices statutes.
    Where possible, public policy should give weight to meaningful 
self-policing initiatives such as CTIA's Voluntary Consumer Code. 
Wireless carriers have demonstrated a realization that proper billing 
practices and consumer satisfaction are important objectives. The Code 
is designed to encourage greater wireless carrier communication and 
disclosure to consumers on a voluntary basis.34 Such 
initiatives should be encouraged and afforded a reasonable opportunity 
to address the particular issues at hand. If demonstrated to be 
effective, such efforts could serve as the basis for national rules or 
to establish liability of non-conforming providers.
B. Public Safety
    Public policy argues for a ubiquitous, reliable and affordable 
public safety communications network. While market forces will likely 
encourage competitors to provide functional 911/e911 services over 
time, the issue should not be left solely to the market.
    Congress (directly or via delegation to the FCC) should establish 
clear 911/e911 mandates for IP-enabled voice technologies. As was the 
case with the wireless industry, policymakers should afford a 
reasonable opportunity for providers of IP-enabled voice services to 
develop compliant systems to meet mandatory standards.35 
Market forces (i.e., consumer demand for 911 service) and a pending 
government mandate should motivate effective solutions. As voice 
traffic migrates from the PSTN to new networks, all segments of the 
industry have an incentive to provide 911/e911 services sooner rather 
than later.
    In the meantime, VoIP providers using public numbering resources 
should be required to fully inform consumers regarding the extent to 
which their service does (or does not) offer 911 service that is 
functionally equivalent to that provided by traditional telephone 
providers. To avoid a patchwork of potentially conflicting state 
regulations, which could chill the rollout of new services to 
consumers, Congress could provide for uniform, national disclosure 
guidelines to which VoIP providers using public numbering resources 
would have to comply in order to provide service.
    Finally, all providers utilizing the 911 system (i.e., those 
routing calls to the 911 system) should bear their ``fair share'' of 
the costs of maintaining the system. Regulatory parity argues that 
those who use the system should, regardless of the platform used, 
support the system.
C. Taxation
    In competitive markets, taxation increase prices, lowers demand, 
and reduces the amount of funds otherwise available for capital 
investment. Despite being drivers of the economy, the advanced 
communications services are generally taxed at rates far above 
generally applicable business tax rates. As more traffic moves to IP 
networks, some may argue that existing tax regimes should apply. Where 
and when possible, the disproportionate tax burden faced by various 
segments of the advanced communications industry should be addressed.
    Taxation of the wireless sector highlights the problem. ``States 
are taxing wireless customers at steep rates of up to 22%-an amount 
typically reserved for activities such as gambling and alcohol 
consumption.'' 36 Estimates are that a typical consumer 
faces a nearly 17% total tax on wireless service.37 In 
contrast, the average tax rate for other goods and services is 6.93%. 
Between January 2003 and April 2004, the effective rate of taxation on 
wireless service increased nine times faster than the rate on other 
taxable goods and services. According to a recent study, each 1% 
increase in the price of service reduces demand by an estimated 1.12 to 
1.29%.38 In Florida and New York, high taxes arguably reduce 
customer demand by about 20%.
    Reducing an excessive tax burden on the nation's advanced 
communications platforms is essential if the nation is to maximize its 
economic development potential. Economist Gregory Sidak estimates that 
reducing wireless taxes to the prevailing general business tax rates 
would increase GDP by $53.6 billion to $65.6 billion over ten years and 
that a one percent decrease in wireless prices would ``increase U.S. 
GDP by between $6.8 billion and $7.8 billion within two years of the 
tax reduction.'' 39
    Last year, Congress took the important step of banning Internet 
access taxes for an additional four years. It is respectfully submitted 
that this temporary ban should be made permanent.40 A 
permanent ban would ensure that Internet access remains affordable for 
all Americans, regardless of the platform used to access the Internet 
(dial-up, DSL, cable modem, Wi-Fi, etc.). Since 1998, the moratorium 
has contributed significantly to the development of the industry (and 
to economic development generally). Ubiquitous access to the Internet 
contributes positively to educational achievement, economic development 
and the delivery of governmental services by Florida and other states. 
Taxing Internet access would represent a tremendous transfer of wealth 
from the private sector to government. Such taxation would only make it 
more difficult for consumers with lower incomes to afford the Internet.
D. Universal Service
    Universal service has proved an important tool in helping bring 
telecommunications services to economically disadvantaged consumers, to 
consumers with special needs, and to consumers in rural or high cost 
areas of the country. As consumers increasingly turn to substitutes for 
a taxed service, not subjecting those substitutes to USF obligations 
results in regulation picking market winners and losers. Some 
competitors, but not others, would bear the brunt of funding the 
program. In reforming the USF program, Congress (or the FCC under the 
authority delegated to it) should subject some ``appropriate'' universe 
of participants to non-discriminatory, technology neutral USF funding 
obligations.
    While reform of USF is a complicated issue involving numerous 
policy choices and many stakeholders, it is respectfully suggested that 
any reform of USF recognize certain core principles, including the 
following:

 USF obligations ought to reflect, to the extent possible, a clear 
        social contract or quid pro quo that exists without regard to 
        technology or platform (e.g., any provider that utilizes North 
        American numbering resources shall be responsible for USF 
        contributions regardless of the technology or platform used to 
        provide service). 41
 The extension of USF obligations to new providers or platforms ought 
        not constitute simply a new tax. Rather, such extension should 
        reflect a reallocation of planned costs amongst some group of 
        similarly situated competitors.
 Providers that are required to share in the USF burden ought to, at 
        some equitable level, be considered for USF distributions.
    Reform of the USF should also strive to tackle distribution issues. 
For example, wireless providers (serving 182 million) contributed 
almost 33% of the total universal service fund in 2004 (approximately 
$2 billion) but received only about 7% (approximately $390 million) in 
distributions. In comparison, ILECs contributed about 26% of the total 
USF last year, but received almost 81% of the fund. Long distance 
providers contributed 37% of the total USF last year, and received 
about 2% of the fund. While parity in contributions and distributions 
across platforms may not be attainable, the cost benefit relationship 
is worthy of consideration.
D. Content
    As the use of new technologies and new types of IP-enabled devices 
increases, so does the risk that that minors may be exposed to 
inappropriate content. Consider the following:
          Porn on mobile phones could grow into a $5-billion market by 
        2010.42
          Playboy Enterprises announced today that the company is set 
        to offer nude and non-nude photo galleries that have been 
        specifically formatted for viewing on Sony's PSP 
        handheld.43
    In the home, access to the Internet is under the supervision of the 
parents or guardian, who can block access to content inappropriate for 
minors. Wireless technologies and portable devices make parental 
supervision substantially more difficult. Parents may not realize that 
inappropriate content might be accessible on the devices or may have no 
idea how to block access to age inappropriate content on a child's 
device (even assuming that blocking is possible). Exacerbating the 
issue is the fact that younger consumers tend to be the early adopters 
of new technologies. How many members of Congress own Sony's new PSP?
    As this Committee is aware, efforts to regulate Internet content 
face a host of complex technical and constitutional challenges. 
Protecting the nation's youth from age inappropriate content, however, 
requires that policymakers and industry work collectively toward 
solutions notwithstanding those hurdles.
    Aggressive industry self-regulation may preempt the need for 
legislation in certain instances. For example, the Cellular 
Telecommunications Industry Association (``CTIA'') is leading an effort 
designed to restrict the access of minors to age inappropriate 
content.44 The guidelines include the following provisions: 
(a) development of a voluntary industry-wide consumer content 
classification system; (b) requirements that users register and provide 
proof of age for accessing certain content 45 and 
requirements of subscriber consent to receipt of certain unsolicited 
commercial content; (c) controls to restrict access to content based on 
content classifications and a process to update the classification 
system in consultation with responsible stakeholders as appropriate; 
and (d) obligations to ensure compliance with applicable laws regarding 
the protection of minors and cooperation with appropriate law 
enforcement agencies.

                            VII. CONCLUSION

    The communications world of today is characterized by a host of new 
technologies and services that are empowering consumers, that are 
strengthening the nation's education and health care systems, and that 
are enabling government to be more responsive to the citizenry. The 
advanced communications sectors are driving, in large part, the 
country's economic growth.
    Advocates for a national policy argue that the full potential for 
broadband to serve as the engine for the nation's economic and social 
advancement is not yet being met. My policy views are based on a 
fundamental belief in markets and a fundamental belief that the 
beneficiaries of a robust broadband market are the consumers.
    Those entrusted with making public policy decisions must 
aggressively pursue policies to ensure that we--as a nation--
expeditiously provide consumers with more choices of innovative 
technologies at the most efficient prices.

                                Endnotes

    1 ``Sending the Right Signals: Promoting Competition 
Through Commerce. October 6, 2004.
    2 In fact, 29% of jobs lost during this period were in 
telecommunications. ``Sending the Right Signals: Promoting Competition 
Through Telecommunications Reform.'' U.S. Chamber of Commerce. October 
6, 2004.
    3 http://www.yankeegroup.com/public/products/
decision_note.jsp?ID=12911
    4 ``CTIA's Semi-Annual Wireless Industry Survey 
Results.'' CTIA. 2005. This investment includes a 7.8% increase in cell 
sites in service from year-end 2003 to year-end 2004.
    5 ``CTIA's Semi-Annual Wireless Industry Survey 
Results.'' CTIA. 2005. This number does not include related jobs, such 
as independent third-party retailers, construction, manufacturing, or 
research and development jobs with other companies. According to the 
Bureau of Labor Statistics data, the wireless industry (cellular and 
other wireless carriers) employed more than 13,893 people in the state 
of Florida during 2003.
    6 ``Innovation: The Keystone of the Commercial Mobile 
Wireless Experience.'' Cellular Telecommunications & Internet 
Association (CTIA) Presentation to FCC. April 2004. http://
files.ctia.org/pdf/CMRSINNOVATIONmar04.pdf
    7 http://www.internetnews.com/stats/article.php/3495076
    8 Raymond James Equity Research: Wireline: Industry 
Brief: Cable's Impact Factored Into Estimates, December 14, 2004, Frank 
G. Louthan IV, Raymond James.
    9 Brown, Ken. ``Cablevision to Offer Internet Phone-Call 
Bundle.'' The Wall Street Journal. June 21, 2004.
    10 Grant, Peter. ``Here Comes Cable...and it Wants A Big 
Piece Of The Residential Phone Market.'' The Wall Street Journal. 
September 13, 2004. p. R6.
    11 FCC Annual Report and Analysis of Competitive Market 
Conditions with Respect to Commercial Mobile Radio Services, Ninth 
Report. FCC 04-216. Released September 28, 2004.
    12 FCC Report on Local Telephone Competition: Status as 
of December 31, 2003. Released June 2004.
    13 Skedd, Kirsten. ``Landline Displacement to Increase 
as More Wireless Subscribers Cut the Cord.'' InStat/MDR Press Room. 
February 25, 2004. . Accessed May 3, 2004.
    14 http://www.tr.com/online/tr/2005/tr031505/tr031505-
17.htm#TopOfPage
    15 J.D. Power & Associates. ``2003 Residential Internet 
Service Provider Study (August 2003).''
    16 Broadband technologies make distance irrelevant for 
many rural patients by providing access to out-of-area physicians and 
health care resources. High-speed networks allow health care 
professionals to deliver medical care more efficiently.
    17 R.W. Crandall and C. L. Jackson, et al, The Effect of 
Ubiquitous Broadband Absorption on Investment, Jobs, and the U.S. 
Economy, Criterion Economics New Millennium Research Council (2003). 
Based on $0.97B per year on residential DSL and $2.38B per year on 
residential cable broadband for a total of some $3.35B per year.
    18 http://www.ncta.com/Docs/PageContent.cfm?pageID=37
    19 http://www22.verizon.com/about/community/fl/news/
alan_opinion.html
    20 http://www.sbc.com/gen/press-
room?pid=4800&cdvn=news&newsarticleid=21427
    21 http://www.instat.com/
press.asp?ID=1221&sku=IN0401183WN
    22 Section 364.01(1), Florida Statutes, grants the 
Florida Public Service Commission jurisdiction over 
``telecommunications companies,'' and Section 364.02(13)(c), F.S., 
excludes CMRS providers from the definition of a ``telecommunications 
company.''
    23 Florida law provides that VoIP is ``free of 
unnecessary regulation, regardless of the provider'' and exempt from 
the definition of ``service'' for purposes of state commission 
regulation Sections 364.01(3) and 364.02(12), Florida Statutes. In 
filings with the FCC, the Florida Public Service Commission 
distinguished between traditional economic regulation and social policy 
regulation is discussing necessary versus unnecessary regulation.
    24 Section 364.0361, Florida Statutes.
    25 Florida Legislature, 2005 Session, SB 2068 and HB 
1649, as of April 25, 2005.
    26 FCC Report on Local Competition:-- Status as of 
December 31, 2003. Released June 2004.
    27 FCC report on ``High-Speed Services for Internet 
Access: Status as of December 31, 2003.'' Table 7.
    28 Verizon corporate news releases, July 19, 2004 and 
April 20, 2005. http://news
center.verizon.com/
    29 The reasoning Justice Scalia, a states rights 
advocate, on the local competition issue supports having a national 
policy to govern IP-enabled services and broadband generally. As 
Justice Scalia has stated, ``[T]he question . . . is not whether the 
Federal Government has taken the regulation of local competition away 
from the states. With regard to the matters addressed by the 1996 Act, 
it unquestionably has. The question is whether the state commissions' 
participation in the administration of the new federal regime is to be 
guided by federal agency regulations. If there is any presumption 
applicable to this question, it should arise from the fact that a 
federal program administered by 50 independent state agencies is 
surpassing strange.''
    30 The U.S. Chamber of Commerce estimates that reforming 
telecom laws would add 212,000 jobs over a five-year period and lead to 
$58 billion in new investment.
    31 See H.R. Conf. Rep. No. 104-458, at 1, reprinted in 
1996 U.S.C.C.A.N. 10 (emphasis added).
    32 An IP voice ``call'' between individuals in the same 
might carom between servers or gateways in different states. 
Determining the topography of such traffic--ahead of time--is often not 
possible.
    33 States can and should work to remove unnecessary 
barriers to broadband deployment. In particular, states can work with 
local governments on rights-of-way access and permitting issues. To 
address the supply side, states can also create financial and non-
financial incentives for build-out of the broadband network. To address 
the demand side, states can offer e-learning applications and other e-
government initiatives to promote the value of using broadband 
technology to carry out day-to-day functions.
    34 According to the CTIA website, 33 carriers, including 
all of the national carriers, have adopted the Code For the complete 
list of the 33 wireless carriers that have adopted the CTIA Consumer 
Code, please see: http://www.ctia.org/wireless--consumers/
consumer_code/index.cfm.
    35 A similar approach was adopted for wireless 911 
services. Initially, the ability to pinpoint the location of a caller 
was not imposed. The industry was given a reasonable opportunity to 
develop a solution.
    36 http://www.yankeegroup.com/custom/research/decision _ 
note.jsp?ID=12704&PID=6DD2924
EE68446BB
    37 This total represents a 6.05% federal tax and a 
10.74% state/local tax.
    38 http://www.pacificresearch.org/events/2003/wireless/
SidakFactsheet.pdf
    39 http://www.pacificresearch.org/events/2003/wireless/
SidakFactsheet.pdf
    40 A permanent ban Internet access taxes does not have 
to preempt state and local taxation of online commerce; impact state 
and local taxation of traditional telecommunications services or long-
distance service that are not solely used to provide Internet access; 
impact state sovereignty over taxation, except to the extent that 
taxing interstate service of Internet access is prohibited; affect the 
State Streamlined Sales Tax Project; impact a state or local 
government's ability to collect any corporate, property, or income 
taxes; or prevent taxation of products or services that are otherwise 
taxable just because they are bundled together with Internet access 
services.
    41 Defining the ``proper pool'' might consider factors 
such as: the share of the voice market held by the provider (so as to 
exclude providers with but a negligible share of the market); whether 
the VoIP is a computer-to-computer application (such as Skype); or 
whether the VoIP does not ``touch'' the PSTN at either end
    42 http://www.redherring.com/
Article.aspx?a=11541&hed=Mobile+porn%3A+Moving+fast
    43 http://news.gaminghorizon.com/media2/
1114012080.741.html
    44 http://www.wirelessweek.com/article/
CA506391?spacedesc=Departments&stt=001
    45 Compare http://www.theregister.co.uk/2005/02/14/
orange_adult_filter/ (Wireless company Orange UK has started blocking 
the delivery of adult content to users not registered as over 18).

    Mr. Upton. Mr. Perkins.

                  STATEMENT OF JOHN R. PERKINS

    Mr. Perkins. Thank you, Chairman Upton, Ranking Member 
Markey. My name is John Perkins. I am the consumer advocate 
from the State of Iowa. I am also currently the President of 
the National Association of State Utility Consumer Advocates.
    The NASUCA is an organization comprised of 42 States whose 
consumer advocates are generally--and the District of 
Columbia--whose consumer advocates are generally charged with 
representing their individual residents in their States before 
their public utilities commissions. As such, we also usually 
have the authority to appear in State and Federal courts, to 
appear before Federal agencies, such as the FCC and FERC, and 
also to appear before legislative bodies, such as Congress and 
our State legislatures.
    As you look at this new legislation involving new 
technologies, I think there are a couple of issues--a couple of 
points I would like to make for you to keep in mind. And maybe 
they don't need to be said, but as a consumer advocate, I guess 
we feel we need to keep making those points as often as 
possible. The first is that the overarching--the overriding 
principle behind all telecom legislation historically and into 
the future is that the public interest has to be the 
overarching principle that we reach for. We have to make sure 
that telecommunications are made as widely as accessible, as 
accessible as possible at the most reasonable cost that we can. 
That should govern any legislation, whether it is Federal 
legislation or State legislation, and it is as applicable to 
the old POTS network as it is to our new Internet 
telecommunications that we are looking at.
    I think the other issue that I would like the 
subcommittees--and this is not just this subcommittee, but the 
subcommittees that are also looking at the competition issues, 
the merger issues, universal service funding, those issues, 
should keep in mind that IP doesn't necessarily mean it is on 
the Internet. Just because it is called Internet Protocol 
doesn't mean that it is--somehow should become an information 
service, and deregulated or unregulated. A lot of the new 
switching that the LECs are using, so-called IP switching, the 
so-called soft switching, those are Internet protocols, but 
they still use the public switch telephone network. My 
telephone call using my wire line Quest telephone may go 
through an IP-enabled switch, but it doesn't make it an 
Internet-based telephone. So as this committee looks at 
definitions of IP, I hope it keeps in mind that just because IP 
is attached to a phrase, that it is not defined so broadly that 
the LECs are going to be able to come in later and say ``We 
have IP switching. We are an information service. You can't 
regulate us.'' I think that is an important issue.
    I think another point that should be made is if we follow 
the media and advertisements, it would appear that every 
American has a computer, and probably most of us have a 
broadband connection to that computer, and that is just not 
true. The latest figures that I have seen show that 30 million 
Americans have a broadband connection, but 170 million 
Americans have wire line access. That is not a very big 
percentage of people that have a broadband connection. And when 
the LECs start saying well, broadband bypasses 70 to 80 percent 
of the American homes. That is a fine statistic, but it is 
really meaningless, because the simple fact of the matter is, 
broadband connections are still expensive, and many Americans 
can not afford a broadband connection. So to say that a cable 
runs right outside their home doesn't mean a thing. They are 
still not going to buy a computer. They are still not going to 
get a broadband access because it is too expensive.
    I think that the last thing was one that was touched on by 
Chairman Munns, and that is the issue of preempting States' 
rights. I think the States have a very legitimate interest in 
consumer protection issues and safety issues, and the Internet 
is really no different than an interstate highway. We have--
States have the ability to regulate the speed and size of 
traffic on its interstate highways. They need that same 
ability. These new technologies are going to be a trap for the 
unwary by the unscrupulous, and State consumer protection 
statutes are uniquely designed to protect their citizens from 
any type of action in that regard.
    We have attached a VoIP resolution that our association did 
a year and a half ago, and I think that the points in that 
resolution are still applicable today.
    Thank you, Chairman.
    [The prepared statement of John R. Perkins follows:]
 Prepared Statement of John R. Perkins, Consumer Advocate of Iowa, and 
  President, National Association of State Utility Consumer Advocates
    Chairman Upton and members of the House Subcommittee on 
Telecommunications and the Internet: Thank you for the opportunity to 
speak to you today on the important issues surrounding how IP-enabled 
services are changing how we communicate.
    My name is John R. Perkins. I am the Consumer Advocate for the 
state of Iowa and am currently serving as the president of the National 
Association of State Utility Consumer Advocates. NASUCA is an 
association whose members are, for the most part, the statutorily 
authorized state officials who are responsible for representing their 
citizens in utility matters before their state public utility 
commissions, as well as before state and federal courts, federal 
agencies and Congress. They operate independently from their state 
PUCs. NASUCA currently has members from 42 states and the District of 
Columbia.
    The rapidly changing face of telecommunications has made it 
necessary to reexamine some of the precepts behind the 
Telecommunications Act of 1996, passed less than a decade ago by 
Congress. Wireless and the Internet have provided diverse new ways to 
communicate with one another, making instantaneous contact over great 
distances no longer the exclusive province of the public switched 
telephone network it was just several decades ago. The technology is 
mind-boggling to the average consumer over the age of eighteen. While 
pre-teens to college students want the most advanced abilities to 
communicate with each other from their telephones, including sending 
pictures and text messages, many of the rest of us just want to be able 
to pick up a telephone, hear a dial tone, have a call completed to the 
number we dial and be able to hear the voice on the other end--all at a 
reasonable price. We don't care through what magic that is 
accomplished. The challenge for Congress is to devise legislation that 
balances that need, with the need to make sure those magicians who 
continue to dazzle us with their seemingly daily new methods of 
communications, have the proper incentives to continue that progress. 
As always, there is a natural tension between the two--and some of that 
can and should be handled by the market place between competitors.
    However, there are some issues that are too important to be left to 
the competitors and entrepreneurs to work out and should continue to be 
regulated by government, both state and federal.
    For example, while most people now agree the Internet is truly an 
interstate phenomenon and individual states should not be in the 
business of regulating the rates charged for Internet service, there 
are important consumer protection and safety issues in which states 
have a legitimate interest. States should be allowed to apply their 
individual state consumer protection laws to insure their residents are 
not the victims of those providers who, in their competitive zeal, may 
take unfair advantage of those consumers who are unfamiliar with this 
new technology.
    Another broad consideration we feel Congress should keep in mind is 
that many local exchange carriers, such as the four regional Bell 
operating companies, will soon be using IP to carry calls by replacing 
their state of the art circuit switches from 10 years ago with new IP 
soft switches. The reason is simple: the new IP soft switches are more 
efficient. But the customers may never realize as they use their old 
telephones and old services that the digital magicians have a more 
efficient way to provide the same old POTS. These customers should also 
not be subjected to lesser consumer protections just because their 
local exchange carrier--who they have dealt with for years ``is 
changing its technologies in ways the customer will likely never 
notice.
    When defining what is an IP for telephony, Congress should take 
care not to define it in such a way that ILECs can claim their use of 
IP on their old networks now would avoid all state regulation. If it 
walks like a duck . . .
    Another consideration we feel it would be appropriate for this 
subcommittee to examine overlaps with those Congressional subcommittees 
reviewing competition in the telecommunications industry as well as 
those examining the recently announced mergers between SBC and AT&T and 
between Verizon or Qwest and MCI. Fully one-third of the broadband 
connections (in the form of DSL) are supplied by incumbent local 
exchange providers, such as the four RBOCs. Of the four, only Qwest has 
announced it will voluntarily allow its subscribers to purchase its 
broadband without the necessity of also purchasing its local exchange 
service. The other three RBOCs require their customers to purchase 
their local exchange service in order to obtain their broadband 
connection.1 Such a tying arrangement stifles competition 
for Internet telephony. Customers should be free to use their own 
equipment, and access software and services freely on their broadband, 
the so called ``net freedoms'' concept espoused by former FCC Chairman 
Michael Powell.
---------------------------------------------------------------------------
    \1\ Verizon's recent announcement it will provide stand-alone DSL 
in some limited circumstances is so constricted as to be an essentially 
worthless concession.
---------------------------------------------------------------------------
    E911 capability is essential for Internet telephone providers. As 
vividly brought home by the recent tragic event in Houston, Texas, many 
people who purchase an Internet telephone product don't realize their 
local law enforcement agencies no longer have the ability to determine 
their address when they call 911 on an Internet based telephone, such 
as voice over IP (VoIP). The providers must be forced to rapidly 
develop the capability for VoIP to allow E911 service. The technology 
is available, but not all companies are using it.2 In fact, 
earlier this month Canada required Internet telephone carriers to 
immediately provide basic E911 service. Two large providers--Primus 
Telecommunications Canada, Inc. and Vonage Canada-- said they supported 
the government's position. CALEA and TTY face the same access issues as 
E911.
---------------------------------------------------------------------------
    \2\ Another problem is that VoIP providers are having problems 
gaining access to incumbent carriers' E911 trunk lines. Vonage recently 
struck a deal with Qwest for access, but has complained that BellSouth, 
Verizon and SBC--who allow their own VoIP service to access their E911 
trunks--are balking at providing access.
---------------------------------------------------------------------------
    Finally, despite news articles that would lead one to believe 
everyone in the United States has a computer with a broadband 
connection, the simple fact is only 30 million Americans have 
broadband. Compared to the 170 million access lines of the traditional 
telephone companies, the number of people who have the ability to use 
Internet telephony is still quite small. As you and other Congressional 
committees examine the entire gamut of issues related to 
telecommunications, it is essential not to forget the vast of majority 
of Americans, especially those in rural areas, who still rely on POTS 
to communicate. In our rush to embrace these new technologies, we 
should keep them in mind.
    Companion issues relate to the Universal Service Fund and access 
charge payments. Currently, Congress is studying the USF funding base 
and how to best handle the continued availability of telephone access 
in high-cost areas. As calls are routed over the Internet to one degree 
or another, providers are refusing to pay into the fund, even though 
their customer may use part of the PSTN to complete a call. The same 
issues arise with access charges. Congress should look carefully at 
these issues when considering any legislation on Internet telephony.
    NASUCA passed a resolution on November 16, 2003 at its Annual 
Meeting dealing with VoIP service, a copy of which is attached to my 
testimony.
    Again, thank you for the opportunity to appear before you to give 
our perspective on this sea-change in telecommunications. I would be 
happy to address any questions of the committee members.
           Resolution on Voice Over Internet Protocol Service
    WHEREAS, the widespread availability of affordable, reliable, high 
quality voice telecommunications service is essential to the public 
health, safety and welfare and is required by federal law;
    WHEREAS, 47 U.S.C. 153 (48) defines telecommunications as ``the 
transmission, between or among points specified by the user, of 
information of the user's choosing, without change in the form or 
content of the information as sent and received'';
    WHEREAS, 47 U.S.C. 153 (51) defines a telecommunications service as 
``the offering of telecommunications for a fee directly to the public, 
or to such classes of users as to be effectively available directly to 
the public, regardless of the facilities used'';
    WHEREAS, incumbent local exchange companies, competitive local 
exchange carriers and interexchange carriers are modifying their 
networks so that they may provision telecommunications services 
utilizing voice over Internet protocol (VoIP) technology;
    WHEREAS, VoIP services may be offered to the public as either a 
voice telecommunications service or a substitute for voice 
telecommunications service;
    WHEREAS, VoIP providers have argued that they provide only 
information services and do not provide telecommunications services;
    WHEREAS, carriers are increasingly migrating their traffic to a 
packet-switched basis like that used for VoIP;
    WHEREAS, the migration of service to VoIP and VoIP-like services 
raises concerns about universal service and universal service support;
    WHEREAS, VoIP and VoIP-like services raise concerns about access to 
E9-1-1 emergency services and financial support for E9-1-1 emergency 
services;
    WHEREAS, regulation of VoIP and VoIP-like services may be better 
accomplished under Title II of the Communications Act;
    WHEREAS, both state and federal regulators are responsible for 
ensuring the continued widespread availability of reliable, affordable 
and high quality telecommunications services, and for ensuring 
continued access to E9-1-1 emergency services for customers of such 
telecommunications services;
    THEREFORE BE IT RESOLVED, that the Federal Communications 
Commission (FCC) should not define VoIP services to be exempt from 
regulation, universal service support obligations or E9-1-1 access so 
that states are preempted from properly exercising their authority to 
ensure the continued provision of reliable, affordable, high quality 
voice telecommunications services, including access to E9-1-1 emergency 
services;
    BE IT FURTHER RESOLVED, that the Telecommunications Committee of 
NASUCA, with the approval of the Executive Committee of NASUCA, is 
authorized to take all steps consistent with this Resolution in order 
to secure its implementation.
Approved by NASUCA:
Place: Atlanta, Georgia
Date: November 16, 2003

    Mr. Upton. For not looking at the clock, you did exactly 
perfect, so----
    Mr. Perkins. I have got my watch right here.
    Mr. Upton. Oh, is it? All right. Mr. Quam.

                   STATEMENT OF DAVID C. QUAM

    Mr. Quam. Mr. Chairman, members of the committee, thank you 
very much for the opportunity to testify.
    This is a topic of great interest to Governors, both IP-
enabled services and really the future of communications. But 
as we look at it, sometimes it helps to step back. And one way 
I can view communications and where we stand is to actually 
look at what has happened to coffee. Back in 1984, coffee was 
just that. It was coffee. Today's consumers must pick size, 
tall, grande, bente, roast, light or dark, caffeine or no 
caffeine, drip, latte, espresso, Americano, frappachino, milk 
or soy, fat or no fat, foam or no foam.
    Communications service today is much the same. Before 1984, 
a phone was a phone. Today, it is analog or digital, landline, 
wireless, or VoIP, text messaging, paging, e-mail, worldwide 
web, call waiting, caller ID, dial-up or broadband, cable, DSL, 
or Y-fi, IP video, satellite, cable, or broadcast. And who 
knows what is to come. That is the challenge that is before 
Governors. It is before Congress. It is before local elected 
officials. How are we going to set up a regulatory scheme that 
fits that world of consumer choice?
    The bottom line for NGA: full and robust competition 
requires a light touch approach that ensures nondiscriminatory 
access to essential facilities, to acknowledging neutral 
policies, and consumer protection safeguards to serve the 
public interest. This can only be effectively accomplished by 
having the Federal Government partner with and grant State and 
local governments the authority to promote competition and 
innovation, encourage economic development, protect the public 
safety, and ensure consumer protections.
    As Congress works to reform the Nation's communications 
laws, Governors encourage this committee to work with State and 
local governments to create a regulatory framework that does 
several things.
    First, one that would employ a balanced federalism approach 
that grants States, territories, and localities the authority 
to protect the interest of their constituencies.
    Second, would create a level playing field for all industry 
participants in any given service area, regardless of the 
nature of the technology used to provide that service.
    Third, it would be sufficiently flexible and technology 
neutral to respond to any new developments in the industry. It 
would also continue to emphasize reliability standards on all 
communications systems, ensure that States, territories, and 
localities retain the authority to manage public rights of way 
consistent with State laws and policies, support States' 
abilities to provide for all their citizens with access to 
communications services, and it would not preempt the 
sovereignty to determine their own tax policies.
    As I have stated before and it has been stated repeatedly 
by this distinguished panel, any rewrite of the communications 
laws should recognize and retain an active role for State and 
local governments in communications policy. In particular, 
Congress should preserve State and local authority in the 
following key areas: public safety would be the first. State 
and local law enforcement and public safety agencies rely 
heavily on communications services and operators to protect the 
public interest. States must continue to have the authority to 
collect these, and run a ubiquitous e911 system within their 
borders. In addition, national communications policies should 
not hinder law enforcement efforts by creating technological 
safe havens to communicate or plot criminal activity. 
Consequently, Governors support Congressional efforts to extend 
necessary components of COLEA to all advanced communications.
    Second, consumer protection. Consumers require a practical 
way to resolve common complaints, service outages, and 
deceptive behavior. States have a long track record of serving 
that role. States should retain the regulatory flexibility in 
enforcement authority to effectively and creatively respond to 
consumer concerns.
    With regard to access, the value of the network--and that 
is what we are talking about, a communications network--is 
directly related to the number of people who use it. Twenty-
four States have instituted their own State universal service 
funds to help ensure that all their citizens can access 
communications services. Governors feel that any changes to 
Nation's communications laws should not hamper a State's 
ability to continue its state universal service fund or prevent 
States from developing new programs to supplement any 
corresponding Federal plan.
    And finally, with regards to competition. Governors welcome 
and support competition. Communications networks are the next 
great economic driver for States and for the Nation, but when a 
competitive market does not exist, States should still retain 
the authority to manage communications infrastructure and 
competition in local markets.
    The 1996 Act ushered in a new era of cooperative federalism 
in communications. This framework took into account the 
responsibilities of each level, based on their core 
competencies. Federal Government used its authority to develop 
national communications goals. States were given regulatory 
flexibility and enforcement powers to promote competition, 
manage public safety networks, protect consumers, and help 
ensure access to communications services. Governors look 
forward to working with the Congress to buildupon our Federal/
State partnership and use our collective strengths as a basis 
for any new regulatory structure.
    Thank you, Mr. Chairman.
    [The prepared statement of David C. Quam follows:]

Prepared Statement of David Quam, Director, Federal Relations, National 
                         Governors Association

    Mr. Chairman and members of the committee, my name is David Quam, 
and I am the Director of Federal Relations for the National Governors 
Association (NGA). I appreciate the opportunity to appear before you 
today on behalf of NGA to discuss the role of states in the future of 
communications policy.

                                OVERVIEW

    The Internet has changed everything. While only a generation ago 
most people had not even heard of the Internet, today they go online to 
conduct business transactions, purchase goods and services, trade 
stocks and bonds, and make phone calls. The Internet has also spurred 
competition. Every week another company seems to announce a new service 
for consumers that breaks with the existing regulatory framework of one 
delivery platform-one service. Telephone companies are rolling out IP 
video services; cable companies are offering Voice-over-Internet-
Protocol phone services; and wireless providers allow a person to surf 
the World-Wide-Web while picnicking on the National Mall. The 
beneficiaries of this revolution are consumers, individuals, and 
businesses that rely on communications services to conduct business, 
purchase goods and services, send and receive information, and reach 
emergency services. The innovators are the companies and entrepreneurs 
who are constantly pushing to find new ways to communicate and to 
improve existing systems. The regulators are the federal, state, and 
local government officials who must now decide how to best work 
together to maximize the benefits for consumers, foster innovation and 
investment, promote competition, protect the public safety, and ensure 
consumer protection in an IP-enabled world.

                      THE PUBLIC POLICY CHALLENGE

    The remarkable revolution in communications technology since the 
1996 Act could have not been anticipated by lawmakers. Current federal 
and state communications policies call for a distinct regulatory 
treatment for telephone, cable, satellite, wireless, and Internet 
services industries. Under this ``vertical silo'' approach, each 
segment is treated differently based on its core service. The 1996 Act, 
which focused on promoting competition within these silos, did little 
to prepare for the development and maturation of new platforms and 
services that are not bounded by technology. It is these new 
innovations, including IP-enabled services, that are creating 
advantages and disadvantages for both incumbents and new entrants, and 
challenging state and federal policymakers to rethink communications 
laws to better reflect the way services are delivered in a digital age.
    Governors welcome this challenge and are committed to working with 
Congress, industry and local governments to modernize the nation's 
communications laws in a way that supports continued growth of a 
competitive industry for the benefit of consumers and the national 
economy. NGA has been working with other state and local organizations 
to find common ground and align our interests and policies. Governors 
encourage Congress to work with state and local governments to create a 
regulatory framework that:

 employs a balanced federalism approach that grants states, 
        territories, and localities the authority to protect the 
        interests of their constituencies, particularly as it relates 
        to promoting local competition, encouraging economic 
        development, protecting public safety, and ensuring consumer 
        protection;
 creates a level playing field for all industry participants in any 
        given service area, regardless of the nature of the technology 
        used to provide that service;
 is sufficiently flexible and technology-neutral to respond to new 
        developments in the industry;
 continues to emphasize service reliability standards on all 
        communications systems;
 ensures states, territories, and localities retain the authority to 
        manage public rights-of-way consistent with state laws and 
        policies; and
 does not preempt the states' sovereignty to determine their own tax 
        policies.
    While Governors look forward to modernizing our nation's 
communications laws in a way that promotes further economic development 
and innovation, any new regulatory structure must also give states, 
territories, and localities the ability to maintain state services and 
roles consumers have come to expect.

        STATE ROLES IN COMMUNICATIONS POLICY MUST BE MAINTAINED

    States play a major role in the nation's communications system as 
regulators, service providers, and consumers of communications 
services. State governments have the responsibility to ensure the 
public interest is being served by all businesses in our states, 
including communications providers. Consumers expect states to ensure 
certain public goods and social goals. These include maintaining the 
public safety, consumer protection, universal service, and consumer 
choice. While Governors understand that these state roles may change as 
technology develops and communication services converge, they still 
believe the states are best suited to perform these essential roles 
consumers have come to expect. States have more resources, as well as a 
better understanding of local markets and day to day issues related to 
communications services, than the federal government, thereby making 
them better suited to carry out and enforce these important public 
services. At the same time, Governors recognize the benefits working 
together within a national communications framework to accomplish 
common goals in protecting the public interest. Specifically, Governors 
feel states must maintain their roles in the following key areas.
Public Safety
    State and local law enforcement and public safety agencies rely 
heavily on communications services and operators to protect the public 
interest. In particular, the ability to receive E911 calls and direct 
emergency services to a caller's location is vital for first 
responders. States must continue to have the authority to collect fees 
and run a ubiquitous E911 system within their borders.
    Currently, states and localities have the sole responsibility for 
funding, managing, and upgrading state wireline and wireless 911 
services. States and localities collect E911 fees on wireline and 
wireless phone services, which is the only source of funding for state 
E911 systems. Without the authority to collect E911 fees on new 
services, funding for E911 systems may be jeopardized as consumers 
shift to new technologies. This potential decrease in funds will place 
a strain on legacy E911 systems and increase the cost burden on 
citizens who use wireline and wireless services.
    Moreover, it is states that ensure all wireline and wireless phone 
companies have access to phone trunks and customer databases, which is 
a critical part of maintaining a ubiquitous and functional E911 system. 
Even though some VoIP services are working to voluntarily implement 
E911 services, they are finding it increasingly difficult to 
interconnect with incumbent phone companies' trunks, making it 
virtually impossible to implement a workable E911 service. The 
Telecommunications Act of 1996 gave states the regulatory authority to 
make certain that wireline and wireless carriers have access to the 
necessary information and infrastructure to provide E911 service. 
States must continue to have this authority over VoIP providers, in 
order to ensure Internet phone services can provide E911 services. 
Moreover, if VoIP providers develop their own E911 systems that do not 
properly connect with each state E911 system, the nation could end up 
with a patchwork of E911 systems that do not interconnect. To maintain 
a seamless and ubiquitous national E911 system, states must have 
regulatory authority to collect E911 fees on Internet phone services 
and make certain all voice services can interconnect with the state's 
E911 system.
    In addition, state and local law enforcement agencies rely heavily 
on electronic surveillance to investigate and prosecute criminals. 
National communications policy should not unwittingly hinder law 
enforcement efforts by creating technological safe havens to 
communicate and plot criminal activity. Consequently, Governors support 
congressional efforts to extend necessary components of the 
Communications Assistance for Law Enforcement Act of 1994 (CALEA) to 
all advanced communications.

Consumer Protection
    Before consumers fully accept, adopt, and substitute Internet-
enabled services for traditional phone and video services, they must 
feel confident and trust these new services. This confidence and trust 
can only grow if consumers have a practical way to resolve common 
complaints, service outages, and deceptive behavior. States have a long 
track record for ensuring consumer protection and are more accessible 
to businesses, consumers, and communications companies than are federal 
officials. States have quickly responded to consumer complaints on 
traditional phone services by developing innovative programs, like the 
``do not call list,'' which became widely popular and was eventually 
implemented on the federal level. States should retain the regulatory 
flexibility and enforcement authority to effectively and creatively 
respond to consumer concerns.

Universal Service
    In order for states and the nation to take full advantage of new 
Internet-enabled services, affordable broadband access must be 
available in all ``corners of a state.'' Twenty-four states have 
instituted their own state universal service funds that now total $1.9 
billion. States collect state universal service funds fees on 
intrastate phone services to help keep phone costs down in rural and 
urban areas, and make broadband connections more affordable where 
competition does not exist. Governors feel that any changes to the 
communications law should not hamper a state's ability to continue its 
state universal service fund or prevent states from developing new 
state universal service programs to supplement the federal plan.

Competition
    Governors welcome and support competition in local communications 
markets. When a competitive market does not exist, states should retain 
the authority to ensure nondiscriminatory access to essential 
facilities, prevent incumbents from using market power to stifle 
competition and innovation, and maintain safeguards when market forces 
fail. Recently, the Federal Communications Commission overturned four 
states' actions aimed at allowing consumers to purchase broadband 
Digital Subscriber Line (DSL) service from a telecommunications company 
without also requiring the consumer to purchase traditional voice 
service from the same provider. Known as ``naked DSL,'' these state 
actions would have added to consumer choice. After all, why would 
consumers who are required to buy traditional phone service with their 
broadband access then purchase Internet phone service?
    States have the resources and expertise to quickly respond to 
situations where access to local networks is used to stifle new 
technologies from taking root. Over the past eight years, states have 
used their resources and expertise to monitor and ensure fair 
competitive behavior in local markets. Governors feel states should 
continue to have flexible regulatory authority to promote competition 
within local markets and protect nascent technologies form anti-
competitive behavior.

                               CONCLUSION

    The 1996 Act ushered in a new era of cooperative federalism in 
communications. This framework took into account responsibilities based 
on competencies. The federal government was given the authority to 
develop national communications goals, while states were given 
regulatory flexibility and enforcement powers to quickly respond to 
consumer complaints, manage public safety networks, protect consumers 
when market forces fail, and help ensure universal and affordable 
access to communications. Governors look forward to working with 
Congress to build upon our federal-state partnership and use our 
collective strengths as a basis for a new regulatory structure.
    Thank you for the opportunity to share NGA's position on the state 
role in the future of communications policy. I would be happy to 
respond to any questions you may have.

    Mr. Upton. Thank you. Ms. Strauss.

                STATEMENT OF KAREN PELTZ STRAUSS

    Ms. Peltz Strauss. Thank you. Good afternoon, Mr. Chairman, 
Ranking Member Markey, and members of the subcommittee. My name 
is Karen Peltz Strauss, and I am pleased to appear today before 
you to talk about disability issues on behalf of Communication 
Services for the Deaf and the Alliance for Public Technology, 
on whose board I serve. In addition, I am privileged to have 
this testimony endorsed by a number of disability organizations 
that represent millions of Americans of a vital interest in 
making sure that the new regulatory structure adopted for 
Internet-enabled technologies will meet their communication 
needs. We thank you for this opportunity to present our views.
    The last time that this disability community came before 
your committee was when you were considering the 
Telecommunications Act of 1996. That Act put into place various 
requirements for access to telecommunications and television, 
culminating nearly 30 years worth of efforts to secure equal 
access. Through this and other laws that your committee was 
instrumental in passing over the past few decades, people with 
disabilities now have greater access than ever before to 
communication. These laws and new mainstream technology, such 
as paging and text messaging, have made a dramatic difference 
in the lives of people with disabilities by opening up new 
opportunities to employment, education, and commerce, and 
making it easier for these individuals to become productive 
members of our society.
    As IP technology has changed the way our Nation 
communicates, people with disabilities are again presented with 
remarkable opportunities to enhance their independence and 
productivity, but consumers will only be able to reap these 
benefits if these technologies are made accessible through 
universal design. People with disabilities don't want to be 
relegated to obsolete technologies or depend on specialized 
devices that are hard to find. They want an equal opportunity 
to benefit from the full range of functions and features of 
mainstream products that the rest of our community enjoy.
    I just refer to people with disabilities as ``they'', but 
really, I should be saying ``we''. We, as a Nation, are living 
longer, and as we do, building products and services to be 
accessible are taking on an even greater significance. 
According to the U.S. census, 42 percent of people aged 65 to 
74 report having some type of disability. This number jumps to 
64 percent for people over 75. Many of us are already finding 
out that advanced years brings reduced vision and hearing. 
Unfortunately, history tells us that without clear directives 
from Congress to provide access, the companies developing IP 
services are unlikely to make their products accessible. This 
is because competitive market forces have not been responsive 
to the needs of people with disabilities. Your response to 
these market failures has been a string of legislative acts, 
the Telecommunications for the Disabled Act, the Hearing and 
Compatibility Act, the ADA, the Decoder Circuitry Act. You have 
seen the need to impose these disability safeguards, even where 
you have otherwise sought to apply a light regulatory touch in 
order to foster competition and innovation.
    Now, to highlight a few areas where specific legislative 
action is needed. First, we ask that you extend the access 
provisions of the 1996 Act to IP technologies now, when it easy 
to do so, rather than later, when retrofitting is expensive and 
burdensome. An accessibility mandate is needed to ensure that 
IP communications services are inter-offerable, so that people 
using text and video have the same ability to talk to each 
other as voice telephone users do. The deaf community has 
already faced problems with instant messaging and video relay 
services not being inter-offerable. Video relay allows people 
who are deaf to talk directly to hearing people with 
interpreters over the Internet. In addition, companies that are 
making IP technologies need to ensure that the interfaces used 
with these products are accessible. Last week, this committee 
watched demonstrations of innovative IP TV systems that would 
allow viewers to scroll through various channels, use Internet 
services, and make the TV experience truly interactive. But 
think for a minute how a blind person can know which channel is 
on, or how to choose among menu options if onscreen menus are 
used. I will tell you, they can't, at least not now. But if a 
speech-enabled chip and an output device are used to connect 
the TV to a PC, the blind person could use a handheld device to 
control the menus with the assistance of a screen reader. If a 
device requires one sense, such as hearing, sight, or voice to 
control its operation, it should offer the option of using 
other senses.
    Second, universal service programs need to be reformed to 
address the needs of people with disabilities in the IP-enabled 
environment. Right now, only common carriers are required to 
fund relay services. Contributions from IP service providers 
are also needed to sustain the viability of these services. 
Conversely, as people with disabilities migrate from using the 
public switch network to IP telecommunications, they should be 
able to use USF subsidies that go directly to end users, for 
example through Lifeline and Link-up programs, to help defray 
the costs of broadband or high priced specialized devices.
    Third, Congress needs to take measures to expand access to 
television programming, first by extending closed captioning 
obligations to IP TV providers, and second, by restoring the 
FCC's rules on video description. And we wish to thank 
Congressman Markey for introducing a bill to achieve just this.
    Finally, we urge that State governments be permitted to 
retain some authority over telecommunications relay programs, 
even where these programs use IP services. Several local 
programs have been directly responsive to the needs of their 
communities in ways that can't be matched by a Federal agency 
located across the country.
    In conclusion, mandates are critically needed to preserve 
the extraordinary gains achieved by more than two decades of 
Congressional efforts to promote full telecom access as our 
Nation now migrates from legacy technologies to more versatile 
and innovative IP technologies. All of the prior mandates were 
created with the understanding that the costs to society of not 
providing access in terms of unemployment, dependence, and 
isolation would far exceed the cost of providing such access.
    We look forward to working with your committee to carry the 
legislative progress made in the past into the IP-enabled world 
of the future.
    Thank you.
    [The prepared statement of Karen Peltz Strauss follows:]

Prepared Statement of Karen Peltz Strauss, Legal Advisor, Communication 
 Service for the Deaf, Member, Board of Directors, Alliance for Public 
                               Technology

    Good afternoon, Mr. Chairman, Congressman Markey and members of the 
Subcommittee. My name is Karen Peltz Strauss, and I am pleased to 
appear today on behalf of Communication Service for the Deaf, for whom 
I serve as legal advisor, and the Alliance for Public Technology, for 
whom I serve on the Board of Directors. In addition, I am privileged to 
have this testimony endorsed by a number of national organizations that 
advocate on behalf of people with disabilities, including the American 
Association of People with Disabilities, the American Foundation for 
the Blind, Association of Late-Deafened Adults, the Deaf and Hard of 
Hearing Consumer Action Network, the National Association of the Deaf, 
Self Help for Hard of Hearing People, and Telecommunications for the 
Deaf, Inc.1 These organizations represent millions of 
Americans with disabilities who have a vital interest in making sure 
that the new regulatory structure adopted for Internet-enabled services 
will meet their communication needs. We thank you for this opportunity 
to present our views.
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    \1\ A brief description of each of these organizations is attached.
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    Members of the Committee, the last time that the disability 
community came before you was during consideration of legislation that 
became the Telecommunications Act of 1996. Sections 251, 255, and 305 
of that Act, requiring telecommunications products and services to be 
accessible by people with disabilities and creating mandates for 
television captioning, were the culmination of a nearly thirty-year 
effort to secure equal access by people with disabilities to the 
telephone network and television programming. We call upon Congress now 
to carry these mandates forward with respect to IP-enabled services and 
the equipment used to access those services.
    As new Internet technologies change the way our nation communicates 
and receives information, people with disabilities may be presented 
with remarkable opportunities to enhance their independence and 
productivity . . . but only if legislative safeguards are put into 
place to ensure that accessibility features are built into IP services 
and products at the time that they are designed, and only if these 
mandates follow the principles of universal design to which the 1996 
Amendments adhered. People with disabilities wish not to be relegated 
to obsolete technologies, nor become dependent on adaptive or 
difficult-to-find ``specialized'' equipment not needed by the general 
public. They want an equal opportunity to benefit from the full range 
of features and functions of mainstream IP products, as these new 
innovations rapidly become deployed throughout their communities.
    Improvements in our nation's communications technologies over the 
past ten years already have made a dramatic difference in the lives of 
people with disabilities. New forms of telecommunications relay 
services, enhanced mandates for television captioning, and enhanced 
mainstream technologies, including paging, text messaging and Internet 
services, have had a liberating effect on the lives of people with 
disabilities and have opened up new opportunities in and access to 
employment, education, commerce, entertainment, and government. This 
Committee is to be thanked for many of these opportunities. Through the 
various laws that you have passed--legislation mandating hearing aid 
compatibility, nationwide relay services, and as mentioned earlier, 
mandates for captioning and general telecommunications access--
individuals with disabilities now have greater access than ever to 
communication and video programming services.
    But many of the gains already made will be lost if the needs of 
these individuals are not again considered as our nation migrates to 
Internet-enabled technologies. The disability community is excited 
about the marvelous and diverse innovations now being developed. The 
ability to select from among many communication modes--voice, text, or 
video--can enable users with disabilities who are able to perform some 
functions but not others, to choose the telecommunication mode best 
suited to their needs and circumstances. IP-enabled services also have 
the capacity to enable individuals to use multiple conversational modes 
during a single conversation, and to even change modes mid-
transmission, if the need arises. But just as easily as new IP 
innovations can offer significant promise, so, too, can they result in 
isolation and disenfranchisement if they are not designed to be 
accessible.
    History tells us that without clear directives from Congress to 
provide accessibility, the companies developing these services are 
unlikely to meet the challenge of doing so. Traditionally, competitive 
market forces alone have proven insufficient to ensure the accessible 
design and manufacture of products and services. There are a number of 
reasons for this. Although it is estimated that nearly 54 million 
Americans have one or more disabilities--collectively comprising a 
significant portion of the American marketplace--when divided by 
disability, it is difficult for any one disability group to create 
enough pressure to influence market trends. In addition, people with 
disabilities on average earn lower incomes than the general public, 
translating to fewer spending dollars capable of impacting competition. 
Finally, people with disabilities are often deterred from purchasing 
mainstream communications products and services because they need, but 
cannot afford, expensive adaptive equipment to make these work for 
them.
    Pressures on company executives to bring profits to their 
businesses in the highly competitive communications industry can be 
overwhelming. Diverting resources to incorporate accessible design is 
risky for one company when access is not required of that company's 
competitors. As a consequence, even an internal advocate for disability 
access within a company may have a tough time selling access 
initiatives to that company's executives, in the absence of laws 
requiring accessibility.
    The unfortunate truth is that without market pressures, the 
telecommunications industry has typically failed to address the needs 
of people with disabilities, except when specifically ordered to do so 
by Congress or the FCC. For example, in the 1970s and 1980s, when 
telephone manufacturers began introducing new phones that were no 
longer accessible to people who used certain hearing aids, consumers 
needed legislative assistance to restore their lost access. Both the 
Telecommunications for the Disabled Act of 1982 and the Hearing Aid 
Compatibility Act of 1988 were needed to order the full restoration of 
hearing aid compatible phones. Similarly, it took an Act of Congress--
Title IV of the Americans with Disabilities Act of 1990--to require all 
common carriers to provide telecommunications relay services, ending 
nearly a century during which deaf, hard of hearing, and speech 
impaired people scarcely had any access to the telephone network. That 
Congress understands the need for disability safeguards even when it 
otherwise seeks to apply a ``light regulatory touch'' to foster 
competition and innovation, was also reflected by the 1996 Act's 
various requirements for telecommunications and television captioning 
access.
    Many of the above legislative mandates rested upon the well-
established universal service obligation set forth in the 
Communications Act of 1934: to ``make available, so far as possible to 
all the people of the United States . . . a rapid, efficient, Nation-
wide, and world-wide wire and radio communication service.'' All were 
undertaken with the recognition that the costs to society of not 
providing communications access to modern innovations--in terms of 
unemployment, dependence, and isolation--would far exceed the costs 
associated with providing such access.
    The FCC, too, has needed to take affirmative steps to remedy the 
failure of market forces to bring about disability access. For example, 
when the explosive growth of digital wireless telephone services in the 
1990s threatened to eliminate TTY and hearing aid users' access to 
these services, the FCC mandated access solutions. Similarly, multiple 
FCC reports on the deployment of high speed Internet access have 
acknowledged that market forces are not enough to guarantee timely 
access to broadband services for Americans with disabilities. For 
example, the second of such reports identified persons with 
disabilities as a category of Americans ``who are particularly 
vulnerable to not having access to advanced services.''
    So what do people with disabilities want in the new regulatory 
scheme that will govern the world of IP-enabled services? Congress must 
act to ensure that IP-enabled products and services offer the same 
wonderful benefits for people with disabilities that they offer to the 
general public. Most importantly, mandates are needed to ensure that 
IP-enabled technologies incorporate features that permit disability 
access now, while these products and services are still being 
developed, rather than later, when retrofitting them will become 
burdensome and expensive. If access features are considered and 
incorporated while a product is being designed, the associated costs 
become a mere fraction of the overall costs of producing that product 
for the general public, and the resulting access is far more effective. 
By contrast, if a product is designed without addressing access needs, 
it is not only more costly to later revise the product to include that 
access, but typically the result is not as well-suited to the 
population in question. For example, the initial failure to incorporate 
access in digital wireless phones resulted in an eight year delay in 
making those phones accessible to TTY users, and to this day, the 
digital wireless industry has not been able to effectively retrofit 
these phones for hearing aid users.
    Fortunately, the beauty of IP-enabled technologies is that they use 
software-based solutions that make it easier to implement access 
features than had been possible with many previous telecommunications 
technologies. If incorporated early enough, software changes in 
mainstream products can be tailored to address a broad range of 
disabilities. And once implemented, most, if not all accommodations are 
likely to benefit large numbers of individuals without disabilities, 
the same way that closed captions--originally intended for use by 
people with hearing loss--are now enjoyed by members of the general 
public in bars, exercise facilities, and airports.
    To achieve the goals of full accessibility by people with 
disabilities, we make the following recommendations:
1. Extend the Accessibility Safeguards of Sections 255 and 251 of the 
        Communications Act to IP-Enabled services.
    It is critical to extend the accessibility safeguards of Sections 
255 and Section 251 (requiring telecommunications carriers to install 
network features, functions or capabilities that comply with Section 
255 guidelines) to communications taking place over the Internet. The 
following are examples of the objectives that such accessibility 
mandates can achieve:
    First, in order to ensure a seamless communications network that is 
equally accessible to all Americans, IP services must be interoperable 
and reliable, so that individuals using text or video have the same 
ability to talk to each other as do people using voice. As providers 
begin to offer new and improved IP services, each is likely to 
independently introduce an array of services designed to expand upon 
our nation's communications networks. But in the effort to get a jump 
on the marketplace, some companies may accidentally or intentionally 
ignore the need to make their products and services interoperable with 
those of their competitors. The result can be confusion and disorder 
for consumers, especially those with disabilities, who may find they 
are able to contact some individuals over a service they have 
purchased, but not other individuals using the same kind of service.
    The deaf community has already seen this occur with respect to 
instant messaging and video relay services. With video relay service, 
people who are deaf and hard of hearing can, for the first time in 
their lives, converse naturally in American Sign Language with hearing 
people via connections made over the Internet and the PSTN. But because 
not all video relay services are interoperable with one another, people 
using this form of communication are not able to enjoy the same 
seamless access that is available to Americans using voice telephone 
services. Interoperability of networks and equipment that provide the 
same functions is not only important for day-to-day affairs; in an 
emergency or national crisis, all Americans need to be able to obtain 
assistance, regardless of the communication networks or devices that 
they use.
    Second, within the IP environment, there also needs to be a common 
protocol for text that is easily combined with other media. At present, 
multiple industry standards exist for text transmissions over the 
Internet and for other kinds of text messaging, many of which are not 
compatible with each other. A single, reliable text standard needs to 
be supported by all systems, so that text transmissions can get through 
to their destinations to the same extent as voice transmissions, 
enabling deaf and hard of hearing people to enjoy the same integrated 
system of communication that is available to voice users.
    Third, IP-enabled services must have electronic interfaces that are 
accessible to people with disabilities. In the 1990s, the increasing 
use of graphical user interfaces almost took the power of computers and 
information networks out of the hands of people who are blind or 
visually impaired, because these interfaces could not be read by screen 
reader software. Similarly, as traditional telephone and television 
technologies are replaced by IP-enabled technologies, many applications 
are becoming available only through graphical, touch screen, ``soft-
button'' or ``on-screen'' interfaces that are not accessible to people 
who do not have the ability to see. Last week, this Committee watched 
demonstrations of innovative IPTV systems that will allow viewers to 
scroll through various channels, access personalized Internet services, 
and make the TV experience truly interactive. The advantages of 
accessing multiple functions--telephony, TV, Internet--through a single 
piece of equipment are enticing to people with disabilities, who may 
benefit from having a single connection for data, video, and voice 
connections. But blind people need to know which channel is on, ways to 
choose among menu options, how to turn on accessibility features, and 
how to operate controls independently. The only means of accessing 
these various features should not be through inaccessible on-screen 
menus. Similarly, blind people may not be able to use IPTV technologies 
if the remote controls used to operate these devices have ``soft 
dynamic buttons'' that change with each press of a button. Touch-
screens, too, can pose problems: first, an individual cannot feel where 
the buttons are, and second, he or she cannot identify what the buttons 
do because they may change as the screens change.
    Mandates are needed to require IP-enabled service providers to 
provide multiple--or redundant--means of controlling applications on IP 
devices. If a device's operations require one sense or physical 
ability--for example, hearing or touch--the user should be able to use 
other senses or abilities to control the equipment, to prevent creating 
new disability barriers.
2. Improve Enforcement of Accessibility Obligations.
    Access obligations need not only be in place; they need to be 
properly enforced. Informal FCC complaints have proven to be 
ineffective as a means of enforcing compliance with rights associated 
with Section 255, closed captioning, and other disability issues. Over 
the past decade, only two formal FCC accessibility complaints have been 
filed, largely because of the burden and expense associated with filing 
one of these complaints. Reform of the Communications Act should add a 
private right of action allowing people with disabilities to enforce 
their rights to accessibility under Section 255, as well as any new 
accessibility mandates. This right properly exists for various sections 
of the Americans with Disabilities Act, the nation's primary statute 
mandating an end to discrimination on the basis of disability.
3. Reform Universal Service Programs to Address the Needs of People 
        with Disabilities in an IP-Enabled Environment.
    At present, only common carriers providing telephone voice 
transmission services are required to contribute to intra- and inter-
state funds supporting telecommunications relay services. As we migrate 
away from traditional telephone services, contributions from IP-enabled 
services providers are sorely needed to both sustain the viability of 
these services, and to distribute costs fairly among all subscribers of 
communication services. Similarly, IP providers should have to 
contribute to other universal service (USF) funds that are used to 
support the Lifeline and Link-Up programs. Because the incidence of 
unemployment is so high among people with disabilities, it is more than 
likely that this population would also be affected by any cutbacks in 
those programs.
    Conversely, USF monies should also be available to support IP 
services and specialized communications devices that may be required by 
people with disabilities. Some deaf individuals no longer purchase PSTN 
service, having already discarded their TTYs for webcams and computers 
that enable video communications. People with disabilities that rely 
exclusively on IP-enabled communication technologies should be 
permitted to choose whether they want universal service subsidies that 
go directly to end users--e.g., through the Lifeline or Link-up 
programs--to be used as partial payment for their broadband service and 
equipment, rather than payment for PSTN service.
4. Video Access: Extend Obligations That Currently Apply to Video 
        Program Providers to IPTV Providers; Restore Video Description 
        Rules.
    The closed captioning mandates enacted in the 1996 Amendments have 
successfully brought television programming to millions of deaf and 
hard of hearing Americans. Just as the FCC extended these mandates to 
services and equipment needed for digital television programming, 
mandates are critically needed to ensure the continued benefits of 
captioning as IPTV technologies take center stage.
    In addition, as Congress goes about reforming the Communications 
Act, we request that it restore the FCC's rules on video description. 
Video description is a technology that inserts narrative verbal 
descriptions into the natural pauses of television programs to enhance 
television accessibility for blind and visually impaired persons. 
Although, in July 2000, the FCC tried to use authority assigned to it 
in the 1996 Telecommunications Act to promulgate rules on video 
description, that authority was deemed insufficient to support those 
rules by the U.S. Court of Appeals for the D.C. Circuit in November of 
2002. While a few television providers still voluntarily provide this 
form of programming access, these rules need to be restored to provide 
blind and visually impaired Americans with greater access to television 
programming.
5. States need to be able to retain some authority over 
        telecommunications relay programs.
    Under Section 225 of the Communications Act, states are able to 
receive certification from the FCC to operate their own relay programs. 
Several of these locally operated programs have been directly 
responsive to the needs of their residents in ways that cannot be 
matched by a federal agency located across the country. Considerable 
innovation and improvements in relay services, including video relay 
services and speech-to-speech services for people with speech 
impairments, originated through state relay programs in response to the 
needs of their populations. If the jurisdiction for IP-related services 
generally becomes federal, states need to have the option of retaining 
oversight over their own relay programs, even where these programs 
utilize IP-enabled services.

                               CONCLUSION

    Only Congress can ensure that people with disabilities--including 
the rapidly growing population of senior citizens whose advancing years 
often bring reduced vision and hearing--are not left behind as our 
nation migrates from legacy technologies to more versatile and 
innovative Internet-enabled methods of communication. For people with 
disabilities, communication access means the ability to compete on an 
equal basis for employment opportunities, benefit from educational 
programs, make sound financial and medical decisions, fulfill civic 
duties, and actively contribute to society as productive participants. 
Those who have the ability to obtain and use information have the power 
to make choices and enhance their opportunities for self-sufficiency. 
Mandates are critically needed to preserve the extraordinary gains 
achieved by more than two decades of Congressional efforts to promote 
full telecommunications access. We look forward to working with your 
Committee to carry this progress forward into the IP-enabled world.

                      Description of Organizations

Testimony Presented on Behalf of:
    Communication Services for the Deaf--CSD is a private, non-profit 
organization of, by, and for deaf and hard of hearing people that 
provides direct assistance through education, counseling, training, 
communication assistance, and telecommunications relay services, to 
more than three million people with hearing loss in more than thirty 
states across the nation. Established in 1975, CSD's objective has 
always been to increase the communication, independence, productivity, 
and self-sufficiency of all individuals who are deaf and hard of 
hearing.
    Alliance for Public Technology--APT is a nonprofit organization of 
public interest groups and individuals, working together to foster 
broad access to affordable, usable information and communications 
services and technology, for the purpose of bringing better and more 
affordable health care to all citizens, expanding educational 
opportunities for lifelong learning, enabling people with disabilities 
to function in ways they otherwise could not, creating opportunities 
for jobs and economic advancement, making government more responsive to 
all citizens and simplifying access to communications technology.

Testimony Endorsed by:
    American Association of People with Disabilities--AAPD is the 
largest cross-disability membership organization in the U.S. With more 
than 110,000 members across the country, AAPD is a national nonpartisan 
non-profit organization advocating for the political and economic 
empowerment of the more than 54 million children and adults with 
disabilities in America. AAPD promotes policies that support the goals 
of the Americans with Disabilities Act: equality of opportunity, full 
participation, independent living, and economic self-sufficiency.
    American Foundation for the Blind--AFB is a national nonprofit 
whose mission is to ensure that the ten million Americans who are blind 
or visually impaired enjoy the same rights and opportunities as other 
citizens. AFB promotes wide-ranging, systemic change by addressing the 
most critical issues facing the growing blind and visually impaired 
population--employment, independent living, literacy, and technology. 
In addition to its New York City headquarters, the AFC maintains 4 
national centers in cities across the U.S. and a governmental relations 
office in Washington, D.C.
    Association of Late-Deafened Adults--Formed in Chicago, Illinois in 
1987, ALDA works collaboratively with other organizations around the 
world serving the needs of late-deafened people. Through its chapters 
and groups around the country, ALDA promotes public and private 
programs designed to alleviate the problems of late-deafness and for 
reintegrating late-deafened adults into all aspects of society.
    Deaf and Hard of Hearing Consumer Advocacy Network--Established in 
1993, DHHCAN serves as the national coalition of organizations 
representing the interests of deaf and/or hard of hearing citizens in 
public policy and legislative issues relating to rights, quality of 
life, equal access, and self-representation. The member organizations 
of DHHCAN include the American Association of the Deaf-Blind, the 
American Deafness and Rehabilitation Association, the Association of 
Late-Deafened Adults, the American Society for Deaf Children, the 
Conference of Educational Administrators of Schools and Programs for 
the Deaf, Communication Service for the Deaf, Deaf Seniors of America, 
Gallaudet University, Gallaudet University Alumni Association, National 
Association of the Deaf, National Black Deaf Advocates, National 
Catholic Office of the Deaf, Registry of Interpreters for the Deaf, 
Telecommunications for the Deaf, Inc., USA Deaf Sports Federation, and 
The Caption Center/WGBH.
    National Association of the Deaf--Established in 1880, the NAD is 
the oldest and largest consumer-based national advocacy organization 
safeguarding the civil and accessibility rights of 28 million deaf and 
hard of hearing individuals in the U.S. The mission of the NAD is to 
promote, protect, and preserve the rights and quality of life of deaf 
and hard of hearing individuals in America. Primary areas of focus 
include grassroots advocacy and empowerment, captioned media, deafness-
related information and publications, legal rights and technical 
assistance, policy development and research, and youth leadership 
development.
    Self Help for Hard of Hearing People--SHHH is the nation's foremost 
consumer organization representing people with hearing loss. SHHH's 
national support network includes an office in the Washington D.C. 
area, 13 state organizations, and 250 local chapters. The SHHH mission 
is to open the world of communication to people with hearing loss 
through information, education, advocacy, and support. SHHH provides 
cutting edge information to consumers, professionals and family members 
through their website, www.hearingloss.org, their award-winning 
publication, Hearing Loss, and hearing accessible national and regional 
conventions. SHHH impacts accessibility, public policy, research, 
public awareness, and service delivery related to hearing loss on a 
national and global level.
    Telecommunications for the Deaf, Inc.--Established in 1968, TDI is 
a national advocacy organization that seeks to promote equal access in 
telecommunications and media for the 28 million Americans who are deaf, 
hard-of-hearing, late-deafened, or deaf-blind.

    Mr. Upton. Thank you all. Thank you all for your testimony.
    At this point, we will do questions from members of the 
subcommittee, under the 5-minute rule as well.
    Any idea how many different franchises there might be out 
there, Mr. Fellman? I have a guess, but I don't know if anybody 
really knows.
    Mr. Fellman. Are you talking about cable franchises, Mr. 
Chairman? You know, I----
    Mr. Upton. Franchise authorities.
    Mr. Fellman. Oh, franchising authorities. You know, I know 
that there are 36,000 units of local government in this 
country, approximately. I know a number of States, I think 
about 10, franchise through the State, many of which still give 
local authorities some role in the process. But I couldn't tell 
you how many actually do the franchising itself.
    Mr. Upton. My guess is there is probably about 10,000. 
Might be a little bit more, might be a little bit less.
    What does the average franchise agreement cover? What type 
of different arrangements do they have?
    Mr. Fellman. Average cable franchise, again, you know, I 
will tell you some things that I think most cable franchises 
cover, but in some ways, they are as different as the community 
needs that the address.
    Many cable franchises cover right of way access kinds of 
requirements. Oftentimes, in my experience, those are 
regulations that one finds in a local ordinance addressing 
rights of way, as well as in the cable franchise. Many will 
contain access requirements for public education or government 
access channels. Some will have requirements for institutional 
networks that I mentioned briefly in my testimony. There will 
be internal uses of that institutional network for various 
local government-related issues, public safety, communications 
internally and otherwise. There are public safety related 
concerns in a franchise requirement for emergency alert systems 
on the local level. General categories of programming, the 
Cable Act, as you know, precludes the requirement of individual 
channels, but does allow a local franchising authority to 
address community needs by requiring categories of programming. 
Franchise fees for the use of the public property are covered. 
Bonding requirements so that damages costs to public property 
can be replaced without cost to local taxpayers. Most good 
franchises will have some enforcement mechanisms in there. In 
the last 10 years, I am very happy to say that many franchises 
have provisions for addressing transfers and mergers, so that 
the local community knows the company that they are dealing 
with, because many of these have turned over a few times.
    So a lot of different things, but those are just a few of 
the major ones.
    Mr. Upton. Mr. Billings would you expand on that at all, 
based on your mayorship in Provo?
    Mr. Billings. I would agree that the things he has touched 
on. I guess for us, as a community, we look at what are the 
goals? What is it we are trying to bring about in our 
community, and certainly as we have negotiated those kinds of 
agreements, we have sought to have universal access. We want 
everyone in our community to be able to be serviced. We have 
talked about what is important in public safety kinds of 
settings, and what needs to be done to serve those needs. And 
then we have talked about other things we want to accomplish, 
and have tried to factor those in. And I think that our focus 
of legislation, perhaps even at the Federal level a lot of 
focus on those broader goals in trying to do things that allow 
those goals to be fulfilled as we do whatever it is we do.
    I just think we have to remember that it is going to be a 
little bit different in every community. Those subsets of 
undergoals will be a little bit different in every community, 
and we need to accommodate that.
    Mr. Upton. It is different. I am aware of one community, 
not in my district, by the way, or even in my State, that is 
currently negotiating an agreement, and they are trying to look 
at a number of different channels. I think they are actually 
looking at 2 or 3 of the public education governmental 
channels. They are looking for equipment that they can, 
themselves, use to broadcast. They actually are also trying to 
get a calling center located within the jurisdiction of the 
community, and it is just difficult for--help me through this 
argument. If you have got a wireless provider that is going to 
compete with that same cable company that is not going to use 
the same right of way. They are not going to need poles or dig 
up streets, yet they want to compete, offering the same 
services. What are your thoughts as to whether they will have 
to comport with the same types of arrangements that that cable 
company will be for that particular village, in terms of the 
services that Brecken-Morter Building personnel, a whole host 
of things that otherwise they, frankly, wouldn't need as they 
look to expand their services and actually compete to bring 
down some of the costs of the services that they would 
otherwise provide?
    And I am out of time, so I will let you answer before I 
pass to Mr. Markey.
    Mr. Billings. I am sure that--there is a long answer and a 
short answer, and my attempt to the short answer would be that 
it is true that they are different. But even those wireless 
providers still have to have access to our rights of way to 
connect up that equipment that provides that wireless 
connectivity.
    And so while there are differences, there are some very 
similar components to that as well.
    Mr. Upton. Mr. Fellman.
    Mr. Fellman. Mr. Chairman, if I could add to that.
    I think the particular specific rights of way obligations, 
obviously, you couldn't apply to a company that doesn't use the 
rights of way, at least on the same level. But the social 
obligations of providing government, public, and educational 
access, there already are set-aside requirements for the 
satellite companies. I think Congress ought to extend the 
public, educational, government access requirement to 
satellite, so like you say, they are all playing by the same 
set of rules, and the community can get the benefit of that 
local programming, regardless of whether they are a satellite 
subscriber or a cable subscriber.
    Mr. Upton. Mr. Markey.
    Mr. Markey. Thank you.
    Ms. Strauss, in closed captioning, back in the early 
1990's, the industry opposed closed captioning. They said it 
would be too much of a burden on them. We said well, we need it 
to help out those 10 or 20 million people who are hard of 
hearing in America who use the TV as to--so we mandated it out 
of this committee, and the television industry did its best. 
Who would have thought the greatest use for it is people in bar 
rooms just watching basketball or football games?
    But unintended consequences of sometimes Congress acting, 
and in fact, it turns out that most immigrant families turn on 
the TV with closed captioning so that their children can see 
the language, because the parents can't speak it. So there are 
tens of millions of others that use it in different ways. So it 
is a real burden. We had to mandate that. And then there is 
others where we created a readily achievable standard for the 
industry to meet in different areas.
    What would you recommend for the IP services? Which 
approach should we take?
    Ms. Peltz Strauss. Well, I would recommend the approach of 
an undue burden standard, which is the standard that is used 
with closed captioning. And the reason for this is that we are 
now at the outset. We are at the beginning of a new technology, 
and with the new technology, it is much easier to incorporate 
access, rather than retrofitting it later on.
    The readily achievable standard was originally created in 
the Americans With Disabilities Act to make it easier for mom 
and pop in small stores not to have to retrofit with their--to 
put in elevators, to put in stairs. Not to have to incur great 
expenditures in retrofitting small establishments.
    The undue burden standard, which basically says that an 
accessibility feature has to be incorporated, unless it is 
undue burden, is easier to meet when you are at the outset of a 
technology. And here, we have software-based technologies that 
are very easy to incorporate access.
    Mr. Markey. Thank you. With the municipalities, back in 
1992 when this subcommittee--we actually had to pass a law 
because cable companies were coming to communities and saying, 
you have got to give us an exclusive contract. If you want us 
to come to your community, the promise is you will never have 
another cable company in town but us. And so 95 percent of all 
municipalities had guaranteed a monopoly in perpetuity to the 
cable companies. So our subcommittee had to void all of those 
monopolies so that we could have some competition.
    Now, we come to 2005, and a lot of people are now saying, 
well, maybe we should pass a law prohibiting the local 
communities from actually providing telecommunications services 
to their own community, in competition with the cable company, 
the telephone company, or whomever.
    Can you give us your views on the appropriateness of 
Congress telling you that you can not have your own system to 
compete with a cable company or telecommunications company, as 
long as you provide equal access to everyone that would want to 
use it?
    Mr. Billings. I am a private sector player, came out of the 
private sector. Believe government shouldn't go where the 
private sector will go, and as I have in my testimony said, 8 
years ago we set out to do a number of things. I said we wanted 
to bring about the benefits of technology to bless our 
residents' lives. And we fully expected and fully intended to 
use private sector provided connectivity. We had five franchise 
agreements in place with fiber providers. When it came time to 
hook up our traffic lights and our scada and our buildings, 
none would do it.
    Mr. Upton. No.
    Mr. Billings. None would do it. None would step up. And so 
we did. And I hope----
    Mr. Upton. You did it? The city did it?
    Mr. Billings. I would hope that you wouldn't preclude 
cities, especially small cities, especially rural cities, from 
being able to do what they need to do when others are unwilling 
or unable to do it.
    Mr. Markey. I agree with you. Mr. Mayor--Mr. Fellman.
    Mr. Fellman. Congressman, thank you for asking that 
question. Let me talk about a legal issue that piggybacks. I 
agree with everything that Mayor Billings said. In the existing 
Telecom Act in 1996, you have got language in Section 253 that 
says ``States and localities shall not pass any laws 
prohibiting any entity from providing telecommunications 
services.'' And a number of States have passed laws, and in my 
opinion, in violation of the Act, by prohibiting their units of 
local government from providing telecommunication services. The 
FCC ruled that while municipalities are creatures of the 
States, they can do to them what they want, that case, as you 
know, got to the U.S. Supreme Court and the United States 
Supreme Court said that Congress was not clear on what it meant 
by any entity. So we thought that it was clear that ``any'' 
meant ``any'', but the U.S. Supreme Court did not agree, and--
--
    Mr. Markey. I drafted, the provision, so you can tell them 
I meant ``any''----
    Mr. Fellman. Okay.
    Mr. Markey. [continuing] in its usual use of the term.
    Mr. Fellman. Had we known that, we would have brought you 
to the oral argument, but there is an opportunity this year to 
fix that problem, because the court would have ruled the other 
way if there was clearer language in the statute and clearer 
legislative record that ``any'' meant ``any''. So I would 
encourage Congress to fix that problem in the next iteration.
    Mr. Markey. We will pay tribute to all of the municipal 
light companies across the country. We will pay tribute to the 
Bonneauville Power Company, to the Tennessee Valley Authority. 
There is a lot of times when they want to do it, the government 
can do it well. But if you don't do it well, they can vote you 
out of office, too. Okay? So you try to do this and it doesn't 
work, you have an accountable, you know, job that the voters 
can exercise their right. But I don't think it should be this 
Congress that tells you, our running municipalities that you 
shouldn't try to undertake these endeavors.
    I thank you, Mr. Chairman.
    Mr. Upton. Ms.Blackburn.
    Ms. Blackburn. Thank you, Mr. Chairman, and I want to say 
thank you to each of you for taking the time to come and----
    Mr. Upton. Could you just put the mic a little closer? 
Great.
    Ms. Blackburn. These chairs are bigger than I am, Mr. 
Chairman.
    Mr. Upton. You are correct. A lot bigger.
    Ms. Blackburn. Yes.
    And while I do have the microphone, since I was in a 
meeting downstairs, I do want to recognize Debbie Tate, who is 
out of Tennessee. I think she was recognized a little earlier 
by my colleague from across the way, but she does a great job 
and I am proud to have her here.
    I have got a series of questions. I am going to try to clip 
through these as quickly as I possibly can.
    I think, Mr. Perkins, I am going to start with you. Or let 
me ask all of you this by Mr. Perkins' testimony. And I am on 
page four of his testimony. This is what he says. ``Most people 
now agree the Internet is truly an interstate phenomenon, and 
individual States should not be in the business of regulating 
the rates charged for Internet services.'' Do any of you 
disagree with that statement, and if so, why? Go ahead.
    Mr. Fellman. I will jump in.
    Ms. Blackburn. Thank you.
    Mr. Fellman. Congresswoman, I think that when you say 
Internet services, I am not clear on exactly what that means. 
Cable services today are regulated in a very limited way for 
basic cable. If video programming is provided over Internet 
protocol, I would take the position that it is a cable service, 
and therefore, would be subject to regulations.
    Ms. Blackburn. All right. I am reading from his testimony, 
and that is why I wanted to see where you all stand on this, 
you know. Internet service is anything that is going to come 
over the Internet, and as we look at the Telecom Act, one of 
the things I look in terms of is we talk voice-over IP. We also 
know that everything is going to come over IP, and I just 
wanted to see if you all were in agreement or disagreement. It 
sounds like looking at your faces in the response--and knowing 
we are short on time now, that you probably would rather 
respond to that later. Am I reading that right from you all? 
And that maybe you would like to give me a written response? Am 
I reading that right from you all?
    Mr. Davidson. I will jump in, Charles Davidson with the 
Florida Commission.
    I agree with the statement that States should not be in the 
business of regulating the rates charged for Internet service--
--
    Ms. Blackburn. Okay.
    Mr. Davidson. [continuing] so I would agree wholeheartedly 
with that statement.
    Ms. Blackburn. Okay. Thank you. Mr. Perkins also--in the 
same paragraph a little bit further down, you--to allow the 
rates----
    Mr. Perkins. Clearly, offers made about the technology of 
why a person should switch to VoIP and get rid of their wire 
line, you hare going to have VoIP providers coming in with the 
new technology advertising and saying you should chuck your old 
wire line. You should have voice-over Internet. It is the new 
wave of the future. There will be advertisements for that. 
People who are unfamiliar with the technology, you may end up 
with the tragedy that you had in Houston, Texas.
    Ms. Blackburn. Okay.
    Mr. Perkins. They simply didn't realize the limitations. 
Consumer protection laws are needed--are in place and can cover 
this new technology to make sure that those ads are not 
promising more or less than they should.
    Ms. Blackburn. Okay, excellent.
    And Mr. Chairman, with that, I will yield back since we are 
in the middle of a vote.
    Mr. Stearns [presiding]. Gentlelady yields back.
    Mr. Stupak.
    Mr. Stupak. Thanks.
    Mr. Stearns. I think what we are going to do, my colleagues 
are just going to continue here, and if Chairman Upton comes 
back, he will take it. So if you want to come vote and come 
right back, we would like to seamlessly go through.
    Mr. Stupak. Very good.
    The two mayors there, you talked about local governments 
providing broadband services you have, and we do it in my 
district quite a bit, because we are the only ones who will do 
it.
    But do you have any opinions on a private public 
partnership for broadband deployment, and where a local unit 
government would give rights of way to private companies to 
offer broadband? Have you been approached with anything like 
that or any opinions on that? Mr. Fellman.
    Mr. Fellman. Congressman, I think that happens all the 
time, and again, that is one of those areas that there is as 
many different variations of that as the creativity of cities 
and the private sector can come up with.
    I have a client in Colorado, a municipality, who is 
negotiating presently with a wireless provider to put wireless 
broadband throughout a very large city, many square miles. The 
city council is fairly conservative. They believe the city 
should not be in the business of providing service, but the 
city clearly wants to find a partner in the private sector to 
come in and get the city wired for wireless broadband. They are 
doing it in such a way where it is not exclusive. Anybody else 
can come in. They have looked at competing companies to see who 
they could get the best deal with. They have regular rights of 
way regulations so the next company that comes in will still 
have access to the poles. So it is not, by any stretch of the 
imagination, putting a stop to future competition, but it is a 
city that is saying we don't want to be in the business, but we 
want to find an industry partner who can come in and provide 
these additional broadband services to our community.
    Mr. Stupak. Anything you want to add, Mr. Billings?
    Mr. Billings. I was just going to say, in Utah, our State 
legislature has not caused it to be so that municipalities can 
not be in the business of deploying broadband, but we are not 
allowed to deploy the retail service ourselves. We provide the 
pipe, and then we enter into retail provider partner contracts. 
And so while it is a little different----
    Mr. Stupak. Right.
    Mr. Billings. [continuing] I think we are specifically 
touching on--that is how it is currently being done in Utah.
    Mr. Stupak. Okay.
    Ms. Munns, what do you think would be the role of the 
States in a universal service reform? Can you speak to that a 
little bit about what role USF funds and a need for Congress to 
take those funds into account?
    Ms. Munns. Yes, I think that there are things, again, that 
we have particular capabilities. We know the networks in our 
States, we are pretty good at knowing who needs what. We are 
good at accountability and doing auditing and that kind of 
thing. We recognize the issues with the universal service funds 
and we want to be a part of giving them out where they need to 
be.
    Mr. Stupak. Do you think VoIP and broadband should be part 
of the USF?
    Ms. Munns. I think, you know, that is something you are 
going to have to struggle with as you look at the size of the 
fund.
    Mr. Stupak. Just thought I would ask.
    Can anyone give me a real world example of why it may be 
necessary for there to be State consumer protection laws until 
there is a Federal law? I am talking about, you know, the 
States have over VoIP or anything else to deploy that. Do you 
think States should be getting involved in this until there is 
a Federal law to sort of smooth this thing all out or mark it 
up even more?
    Ms. Munns. I will take that.
    You are talking with respect to----
    Mr. Stupak. Yes.
    Ms. Munns. [continuing] consumer protection----
    Mr. Stupak. Yes.
    Ms. Munns. [continuing] issues, and that gets back to what 
I was talking about before, which is when consumers are harmed 
when their expectations are not met, we find out about that 
first. They come to us for relief. To have to say we need to 
forward that to Washington so they can look at it, to the FCC 
or whoever to fashion a remedy for this. A lot of the 
experimentation, a lot of dealing with it, trying to find 
something that works is done first at the State level, and then 
the Federal Government acts. I don't think you want to take 
away the capability to address those things and find a solution 
that works. It may be something that you want to Federalize, 
but to say that you can't do that and that it has to start at 
the Federal Government, I think is backwards.
    Mr. Stupak. Okay.
    Mr. Fellman. Congressman, there is a great example of that 
today that is pending that consumers are hanging out there, and 
that is do customer service standards and privacy protections 
apply to a cable modem service? And when the FCC decided a few 
years ago that cable modem service was not a cable service, but 
was an information service, one of the questions was ``What 
about our customer service standards?'' And at first, the FCC 
said well, we said it was an information service, so send your 
complaints to us. They quickly realized they didn't have the 
staff to deal with consumer complaints at the FCC, so they said 
no, continue sending them to your local governments, but it was 
not clear.
    They have had a pending proceeding at the Commission for, I 
believe, it is over 2 years to determine whether customer 
service standards, either of the Federal standards that the FCC 
adopts, or local customer service standards, apply to consumer 
protection and privacy rights on cable modem service. It has 
been open for 2 years. Now, some communities have taken the 
issue into their own hands. Montgomery County, Maryland, is 
working on it, the city of Seattle has very robust standards 
that protect the privacy of their consumers on cable modems. 
But the industry, the cable industry, is fighting it, and they 
are saying you have got to wait for Washington to come up with 
an answer. We don't think you have legal authority. So 
consumers are hanging out there on privacy protection related 
to cable modem.
    Ms. Peltz Strauss. If I can add for disability issues, 
States have been very responsive to the needs of their specific 
communities, especially on relay services and designing 
services specifically for people with speech disabilities and 
people who are deaf who use sign language interpreters.
    And that is not to say that the Federal Government 
shouldn't have a role in setting some standards. Right now, we 
have a dual system where States are allowed to set standards 
that exceed Federal minimums, and that would be the best 
result.
    Mr. Stearns. I thank the gentleman. I think we have about 6 
minutes left. I will take the liberty to ask a few questions 
here. If the chairman doesn't come back, then we will adjourn 
temporarily the subcommittee.
    Mr. Davidson, we appreciate you being here. You have been 
kind enough to work with myself and my staff, and of course, 
from Florida, we appreciate your input. You have some very good 
ideas.
    I noticed in your statement, you said ``Efforts to 
pigeonhole new technologies into regulatory constructs will 
service primarily to delay the development and deployment of 
these technologies for the consumer.'' I think that is 
something I wouldn't mind you elaborating on. You know, I think 
it has been reported the United States has dropped from 13th to 
16th in broadband penetration, and one of the main reasons was 
lack of competition, vibrant competition. But the term 
``pigeonhole technology'' might just elaborate, if you could.
    Mr. Davidson. Well, I will. That new statistic is 
troubling. I sometimes think, though, as a country we are not 
as bad as sometimes it is portrayed. We have an absolute sort 
of high level of penetration in terms of people, and when you 
compare the U.S. to China, they have got a lot more people, so 
the percentages are going to be off.
    When I said ``pigeonhole'', the regime that exists was 
designed around telecommunications, and it distinguished 
between telecom and just everything else. And everything else 
includes, according to some, cable modem service. Some will 
argue that as a telecommunications component, it would include 
the VoIP service that I use at home. I don't have a telephone; 
haven't for a year. And when you tell sort of these new 
entrants, whether it be Vonage or someone else, that you are 
going to have to comply with the telecommunications 
obligations, the regime that exists now, I think they are not 
going to be able to raise the capital. They are not going to 
offer the service. It won't come to market. There may be some 
providers, really large, established providers, who may vary an 
offer and say you know what? We can comply with the 
telecommunications regulations and we will do that. But we want 
sort of the dynamism that we see with a lot of folks out there 
competing with their services and offerings in the market. And 
we need to somehow encourage that and we need to empower the 
consumers to be able to make the choices they want for their 
new technologies.
    I, as a consumer, made a choice. I do not want a telephone, 
so I made a choice to go with VoIP service. I might not have 
had that option. I might have had such a really low bill for my 
voice service at home had the company been pigeonholed into the 
telecom box.
    Mr. Stearns. I think I am going to have to go vote, so I 
think I will temporarily suspend the committee, and the 
chairman should be here and we will resume. So I appreciate 
your patience here.
    [Brief recess.]
    Mr. Upton. When we left, there were going to be two votes, 
and they changed it to one. So if it is two, we are going to be 
running pretty fast, so I told the other members that, but in 
order to keep going, we will go a little bit out of turn, I 
guess, and go to Mr. Bass for questions.
    Mr. Bass. Thank you, Mr. Chairman, and I want to first 
apologize for--I assume obviously everybody has given their 
testimony. I am not familiar with everything that you have 
said, but I understand the gist of the subject matter here 
today. And I just want to ask one question.
    I think that there were some that talked about the issue of 
core social obligations. Maybe it was you, Mr. Fellman. And I 
guess the question is core social obligation or economic 
redlining, I think you mentioned--I don't know whether you 
mentioned it or not, but 911 consumer advocacy, and so on. 
Local PUC's and local communities have traditionally had the 
responsibility of monitoring these functions. Is there any 
problem with having that responsibility handled on the Federal 
level? Universal service might be another issue, I think, 
because 911 in community A is no different from 911 in 
community B or in State A versus State B and so forth. Is that 
a--do you understand that question?
    Mr. Fellman. I understand the question and I think for each 
of the core social values, you have to look at them 
differently. Some may make more sense to be dealt with on the 
State level, and I am not an expert in telling you whether 911 
would be negatively impacted if it was all Federal versus all 
State. I would tell you, particularly with respect to the 
access channels, which is a core social obligation, in my 
opinion, there is no way that the needs of Detroit are the same 
as the needs of Kalamazoo or the needs of some small community 
in the upper peninsula of Michigan. And to have a Federal rule 
that says here is what the local needs are and here is what the 
obligation of a video provider is going to be, there is just no 
way to have that work on the Federal level.
    Customer service standards, which I mentioned briefly while 
you were out of the hearing room, again are something that some 
communities are active in the way they enforce them. Others 
have a much lighter touch. In large part, they are a function 
of the history of the service providers in the community and 
what kinds of problems they have had, which is why I think the 
system we have today with cable and customer service works. We 
have Federal standards that communities can adopt and in fact, 
most do. They just adopt the Federal standards. But they also 
have the ability, if there are particular problems in 
particular communities, to adopt different, and in some cases, 
more stringent local standards that can be enforced at the 
local level.
    Mr. Bass. Make it quick, because I want to ask one more 
question before--go ahead.
    Ms. Munns. Well, I think, you know, who should be subject 
to e911 is certainly a Federal decision, because you don't want 
that to differ from State to State. But it is something that 
should be clarified is of these services, who has to provide 
e911, so that we all know.
    With respect to complaints, we did a quick survey of 20 
States who processed over 200,000 complaints in 2004. That was 
20 States, not including California. This is something that I 
don't think the Federal Government really has the capability to 
do.
    Mr. Bass. Different question.
    What is your--what are your observations concerning 
government action, if any, when the day comes that non-cable 
providers start providing cable services in communities without 
paying franchises, if that happens? Franchise fees.
    Mr. Fellman. Well, I guess that can't happen unless 
Congress changes the law, because the way video programming is 
defined in Title VI of the Communications Act right now, when 
non-cable providers begin providing video programming over 
facilities that are located in the rights of way by statutory 
definition, that becomes a cable system and they are prohibited 
from providing those services unless they have a cable 
franchise. So clearly, Congress could, if it chooses, change 
that system and eliminate cable franchising. I think that would 
be a terrible mistake, again, for the reasons that I went into 
in great detail in my written testimony, because there are so 
many elements of cable which are purely local, and community 
needs on a local level will not be met if cable franchising is 
taken away or general national rules are imposed at the Federal 
level.
    Mr. Bass. Okay. Chairman, I don't have any other questions. 
Thank you.
    Mr. Upton. Mr. Boucher.
    Mr. Boucher. Thank you very much, Mr. Chairman. I want to 
extend thanks to our witnesses for their illuminating testimony 
today.
    I was particularly pleased to hear the comments of Mr. 
Fellman and Mr. Billings concerning the appropriateness of 
community networks, just as electric utility service was 
provided by municipal utilities beginning in the 1880s, because 
the commercial providers bypassed a lot of communities.
    We have a parallel situation today with regard to 
broadband. We saw a disturbing report this week that says that 
the United States has now dropped two more positions from 13th 
to 15th in ranking internationally among nations in broadband 
penetration, measured as a percent of the population using 
broadband. We stand at 11 point something percent of our 
population currently using broadband, and we are now 15th in 
the world. And I think local governments have a role to play, 
particularly as you suggested, Mr. Fellman, in rural areas and 
in some cities which have small populations in offering a 
service that the commercial sector either has not provided or 
only provides at such a high price that it is effectively 
unavailable for residents and much of the business community.
    I have two municipalities that I represent that have 
deployed fiber optic networks, and these are very popular 
services with my constituents. One of those only provides 
broadband high speed Internet access. The other one provides 
comprehensive telecommunications services. And both are 
treasured in the communities where they are located. And the 
penetration rates for broadband there are higher than the 
national average. So I think there is a role to play. I was 
glad to hear your testimony.
    I want to follow up on the inquiry that I believe Mr. Bass 
was opening. I didn't hear all of what he said, but we need to 
have a delicate and serious conversation about franchising. And 
let me sort of state a couple of principles.
    First of all, there are a lot more franchising authorities 
than I think we are acknowledging. In the Verizon service 
territory alone, I am told there are 10,000.
    And so the real number nationally is some multiple of that. 
And Mr. Fellman, I think you suggested 36,000 local franchising 
authorities across the country. That is probably a more 
accurate figure. Let us say 40,000 for sake of conversation. If 
a company like Verizon, that has to get 10,000 franchises in 
order to offer video, whether it is IP-based or whether it is 
just digital cable, is able to average one franchise a day, it 
would take about 40 years in order to get them all. This is 
every business day of the week getting one. Now maybe they 
could do a little better than that, but I kind of doubt it, 
given the necessity of devoting a lot of manpower to the 
effort, and whatever the cost of that might be.
    And I think, you know, to the extent we have delays, 
consumers in these communities are denied the benefits of 
competition, more varied services, the pricing competition that 
inevitably comes when you bring new providers into the market. 
And that is an undeniable benefit for residents across the 
Nation.
    In addition to that, the local governments are denied that 
second or third or fourth franchise fee, which would multiply 
by orders of magnitude the amount of revenue that you get from 
your franchise. And I am just wondering if we can't embark on a 
conversation. I don't have a fully formed view of this. If I 
did, I would announce it and tell you what it is. But I am 
persuaded that we need to do something different than what we 
are doing. The opportunity for telephone companies to get into 
the market, for fixed wireless providers to get into the 
market, I think really argues for a new construct.
    So let me just try out on you a set of principles, and I 
would like your response to this potential.
    Let us suppose that we had a national franchise, and it 
contained certain elements to be discussed and agreed upon. But 
among those elements would be that you get paid, that whenever 
a multi-channel video provider offers a service in your 
community, you get an amount of money tantamount to the 
existing franchise fee. So we take money off the table; you get 
paid, and you get paid every time another provider comes in.
    Let us also assume that one of the elements of this 
national franchise is public access channels. So public 
educational, governmental access would be afforded by the new 
entrants just as it is by existing cable.
    Now if we do this, I mean, first of all, you get a lot more 
money real fast. The companies are able to roll out their 
services very fast. Your consumers get a lot of advantages very 
quickly, in terms of competition, new kinds of video being 
offered, better pricing.
    What would you think about that, just for starters. What is 
your response?
    Mr. Fellman.
    Mr. Fellman. Thank you, Congressman.
    You had said that you don't have a fully formed opinion. I 
have a partially formed opinion.
    Mr. Boucher. Okay. That is better than fully formed. 
Partially formed on both sides is good.
    Mr. Fellman. You know, I think it is a conversation worth 
having. I am not in a position today to say this is a great 
idea, or this is a lousy idea. I think the conversation would 
have to try to define what are those elements that are purely 
local. What are the local police powers? But I think if there 
is a way to streamline the process, it is absolutely 
appropriate to be talking about it.
    There is an analogy that is taking place right now, which 
is an initiative started by the National Governors Association. 
It talks about telecommunications taxation where the Governors 
and the State legislators and local mayors and the 
telecommunications industry are talking about telecom tax 
reform. I think that has been a good process yet, and I hope it 
will be successful at some point.
    On the issue of franchising, however, I think there is a 
lot of people that need to be at the table and discussing it. 
And I want to make one clarification when I said 36,000. It is 
units of local government. Not all of those are franchising 
authorities, so I am not sure that I would agree with you that 
we have got 40,000 franchising----
    Mr. Boucher. I don't know either. I am just taking a number 
I know to be reasonably accurate in the Verizon territory and 
extrapolating from that.
    Mr. Fellman. You have mentioned two key issues, the 
compensation for the public rights of way and the PEG channels, 
and if those were guaranteed to address local issues or local 
needs in some way, you know, that is a great start. I think 
there is--the only problem with public access issue that you 
mentioned that jumps right out at me, that when you say it 
would be guaranteed at the Federal level. Again, what is 
necessary in a small municipality that you represent may not be 
the same thing that is needed in a larger municipality. So 
somehow, there has got to be that local negotiation for what 
community needs are. Otherwise, in order to protect local 
franchising authorities, you have to error on the high side. 
And that is something that is not fair to the industry.
    Mr. Boucher. Well, this is open for discussion. I mean, 
obviously we would have to learn a lot more than we know today 
before we go forward. But I am encouraged by your response. I 
mean, it sounds like this is a conversation we might be able to 
have, and I look forward to working with you.
    Mr. Chairman, with your indulgence, let me just ask Mr. 
Billings, and then I see Mr. Davidson wants to respond, too.
    Mr. Billings. Thank you very much. I believe it is a 
conversation that if you do have it, we want to be a part of 
it. I guess I am sitting here in my mind wondering if there 
isn't sufficient manpower commitment to come into my community 
and negotiate a franchise agreement with me, is there going to 
be sufficient H.R. commitment to put in a system and service 
that system once it is franchised and be responsive to my 
customers.
    So I see your point and I know what you are driving at, but 
I think it is one we would thoughtfully want to reflect upon 
and be a part of the conversation as well.
    Mr. Boucher. Let me just add one more element to this. This 
could go on until dark, and I am not going to carry it on until 
dark, but it wouldn't upset me at all if you came back with a 
proposition that said we love being paid, we love the idea of 
PEG channels, but clarify our authority to offer community 
networks at the same time and now we might have a deal.
    And so if you came back with that kind of response, you 
wouldn't upset me in the slightest.
    Mr. Davidson.
    Mr. Davidson. Thank you, Congressman.
    Conversation is a great idea that has to occur. I also 
think that national rules would provide certainty to a whole 
host of new entrants who are wondering what is going to happen 
in various States. The government getting paid is a good thing. 
State and local governments need money.
    My concern is if right now in a region, hypothetically, a 
franchise fee revenue is $1 million. If new entrants come in to 
offer services, any sort of extension in franchising fee 
payment obligations, in my view, ought not reflect the new tax. 
The revenue ought not go up to $2 million; rather, it ought to 
be some allocation of that $1 million across a pool of 
similarly situated participants, unless the actual cost of 
local government goes up.
    Another sort of challenging area is you have got 
traditional cable, video-over IP, which has a capacity to 
compete with cable, and you have video-over fiber to the home 
or fiber to the node, which cable will say is closer to cable. 
What do we do, for example, when turn key programming--and it 
is out there, sort of full programming comes just over the IP 
network and it is not based upon any sort of location of 
facilities in an area, and there is just a company that is 
providing programming over the Internet.
    Mr. Boucher. I think we impose the same rules. I mean, that 
is my initial response to you.
    And by the way, let me add, I believe that whatever we do 
for telephone companies, we also have to do for cable. We have 
to be even handed about this.
    So there are real challenges in this subject matter. This 
may prove to be one of the most interesting and challenging 
aspects of our reform effort, but it is one I am sure we are up 
to, particularly with your participation.
    Mr. Chairman, my time expired a long time ago.
    Mr. Upton. Yes.
    Mr. Boucher. Thank you very much.
    Mr. Upton. And for a little while you were safe, because 
the other members hadn't returned, but they now have. And I 
would recognize Mr. Inslee for 5 minutes.
    Mr. Inslee. Thank you.
    Mr. Fellman, I just came in the last part of your answer to 
Mr. Boucher's question. I just wonder if you can flesh out a 
little bit for me, if we were going to go to, let us say, you 
knew today there was going to be a statewide or national kind 
of franchise standard. What are the parameters of where you 
would put in how many access channels, how many hours, how 
many, you know, build-outs, how many miles--I mean, what 
parameters would you have to have to meet sort of the menu item 
of where you are right now?
    Mr. Fellman. Congressman Inslee, your question, I think, 
discloses why this would be so hard to accomplish. Because the 
answer is different in every different community, so I don't 
know.
    Congressman Boucher asked if we can start that discussion, 
and I think I am always willing to talk about anything, you 
know. ``No'' is always an appropriate answer in any kind of 
debate or discussion, but I think it is inherently difficult, 
extremely difficult to come up with a national rule on how to 
meet the local needs of every municipality and county in this 
Nation.
    Mr. Inslee. So I am trying to get a flavor of how far the 
spread is, like in your State, what is the smallest number of--
let us start with number of access channels in a franchise----
    Mr. Fellman. That is easy, zero.
    Mr. Inslee. Zero.
    Mr. Fellman. Right.
    Mr. Inslee. Okay. So zero in your State? There is no access 
channels in----
    Mr. Fellman. Well, no, the smallest number.
    Mr. Inslee. Smallest number.
    Mr. Fellman. There are communities in my State that have no 
access channels.
    Mr. Inslee. And what is the highest number?
    Mr. Fellman. Well, I think Denver has eight or nine. Some 
of them are used internally for internal communications. It is 
somewhere in that range, maybe a few more or maybe a few less.
    Mr. Inslee. If you went around the country--I am just 
brainstorming here. I haven't thought through this. It doesn't 
mean I have bought any of this Kool-Aid at all, but I mean, if 
you were to go through and say well, if you looked at 
communities based on population size, when you get over a 
million you have--I wonder if you would find sort of fairly 
consistent patterns between population bases and number of 
access channels. Do you think you would, or not?
    Mr. Fellman. I don't think you would, and here is why: 
because it is not simply a function of population. And the 
example that I can give you from my State is the city of 
Durango in southwestern Colorado. A stand alone city, about 
40,000 people. They are out there by themselves. They are the 
big metropolitan area in southwestern Colorado. They have an 
incredibly robust government access and public access broadcast 
operation. They get private donations as well as city money and 
cable money that promotes this kind of programming, and it is 
widely watched in that community.
    The city of Lewisville, Colorado, same population, about, 
in metropolitan Denver. A very different community; part of a 
much, much larger metro area of 2 to 3 million people and 
growing, and the needs in that community are different. So the 
number of channels, the amount of money that you would want for 
equipment, the type of programming that you would want to be 
producing, you know, you can say that all councils are going to 
want to broadcast their city council meetings and their 
planning commission meetings, but beyond that, it changes 
dramatically from community to community, regardless of the 
population.
    Mr. Inslee. In the States, I am told that some States have 
statewide franchising protocols now. How would you characterize 
the differences there than other States that have really local 
decisionmaking? Is there any way to generalize there or not?
    Mr. Fellman. A little bit. But now, we are getting a little 
bit out of my area of expertise. I know some States have more 
control in their local franchising. Others, like New York and 
New Jersey, the State will approve the franchise but the local 
government is allowed to and does, indeed, do the community 
needs assessment and negotiate based upon their local needs and 
ultimately, it just is given to the State to be adopted in 
accordance with State rules. So there are some heavy State 
control operations, and there are some partnerships where the 
local governments have a lot more control. So it just varies 
from State to State.
    Mr. Inslee. Does anyone else want to add to that at all?
    Ms. Munns. I will just add. I have a list of the States 
that do that. I know that they have varying models, and we 
would happy, if it would help the subcommittee, to try to 
provide that information.
    Mr. Inslee. That would be interesting. Thank you.
    Mr. Upton. Mr. Gonzalez is recognized for 8 minutes.
    Mr. Gonzalez. Thank you very much, Mr. Chairman.
    Let us see if I can try to make sense of it all. Well, that 
is kind of impossible in Congress, but technology moves 
forward. Old technology is replaced or augmented or whatever by 
the new technology, and that is what we are really facing here.
    In the old days, what was a telephone company, what was a 
Bell, what was a cable company, and they call this--they had 
all these fancy names about convergences and such. But we have 
to find some answers working with the States and localities 
that have very legitimate interests.
    My concern is it really a monetary interest, the fees in 
any kind of form, or is it really what you all have referred 
to, public requirements, social needs, social regulations. And 
some of it can be very reasonable and legitimate, and others 
can really be quite burdensome and really interfere with what 
we have to do in this country in order to utilize that 
technology to its fullest and its greatest advantages.
    So I guess my question--and Mr. Fellman and Mr. Davidson in 
particular, because I was reading your testimony. I think you 
all touched on it more than anyone else. Is it--when you say 
local needs, social needs, social requirements, is that really 
the main consideration, or is it really one of fees? In other 
words, revenue sources. Because it is--I don't know how we 
reconcile some things, to be real honest with you. So that is 
the first question.
    And the second one, because what happens is time gets all 
used up, except I did get 8 minutes here. Second question would 
be to Mr. Fellman. You said something that was really 
interesting, and I believe before we broke for votes, something 
to the effect that, I guess, if it is video coming in on IP, 
then it is cable. In other words, what is the final product 
that is being delivered or whatever it is, determines its 
nature, not the means or the method or whatever.
    And so when you all get through the first question about 
not the competing, but what weight do you put on fees, revenue 
sources, than these other needs, social needs and requirements?
    Mr. Fellman. Congressman Gonzalez, thank you.
    You know, I could be flippant and say the answer to your 
first question is yes, because they are both important. 
Clearly, if my city were to lose the franchise fees that we 
generate from cable, basically the rent that we charge private 
entities who use public property in order to generate a profit, 
it would be a huge hit on our general fund. It translates into 
police officers, it translates into library hours and rec 
centers and it would be a real hit on the local essential 
services that we provide. And frankly, I think it would be 
analogous, too, if the Congress said, you know, if it is all 
just about money, maybe we shouldn't option spectrum anymore. 
We want these services, maybe we should just give it away to 
the companies. It is the same thing. We are talking about our 
local public property; you are talking about Federal public 
property that the Congress has responsibility for. So the money 
is very, very important.
    But the social obligations are, as well, and I am intrigued 
by your comment that there are some that are very, very 
burdensome, and I think if we are going to have a discussion, a 
conversation going forward, I would be interested in if you 
have more specific questions of what those are and how they 
work, we would be happy to follow up with you and get you and 
the subcommittee more additional information.
    I think cable has been very successful. There is more 
broadband through cable systems than any other method, and they 
are the ones that have been following and abiding by these 
social obligations for many years, and yet, they have more 
penetration than any other source of broadband, as far as I am 
aware, in this country. So I don't think that they are too 
burdensome in order to allow our consumers to utilize these 
technologies.
    You have got to remember, cities and counties are some of 
the more larger and sophisticated users of these technologies 
as well. We don't want to slow down the process. We want the 
competition and the new technologies in as quickly as we can 
get them, but we think it is also important to maintain these 
social obligations. And I think they are all equally important, 
but would be happy to get more details to you if you have 
questions about specific ones.
    Mr. Gonzalez. Mr. Davidson.
    Mr. Davidson. Thank you.
    On the social requirements, my answer too would be yes to 
the question. But on the social requirements, I think what 
Congress has to ask itself is okay, what is the social pact 
that we are engaging into? Certainly, a 911 obligation or 
certain consumer protection regime wouldn't necessarily apply 
to a sky technology that you and I might just download on our 
computers to chat. But society has determined aside from the 
fact that telecommunications was provided by monopolies, that 
911 service is important. It is an important component of our 
society, so going forward, for those providers that may engage 
in a social contract may use North American numbers or do 
something else that is utilizing a public resource, it is fair 
to say, you know what, you probably need to come with a way to 
comply with a 911 standard.
    I think the money issue is very important, and I look at 
that from two angles. One angle, in Florida, State and local 
governments--local governments are scared to death that as 
these new technologies emerge and as customers move to these 
new technologies, they are going to lose revenue. They want--
many want to be able to tax VoIP that is a substitute for plain 
old telephone service, because they are afraid they are going 
to lose the revenue from that. Cable franchising authorities 
are really concerned about losing the franchising-free revenue 
as video over IP rolls out. If I disconnected my cable, and 
lots of folks in my area disconnected their cable because they 
could get the programming they want, whether it is all sports, 
all entertainment, whatever, over their IP network, that scares 
folks because cable is going to have a hard time competing. And 
if these new providers aren't paying the funds, government 
loses.
    But I look at the money issue from another angle as well. 
That, to me, is one compelling reason why we need a national 
policy on these issues.
    California just went through what, in my view, is a failed 
experiment with their California Bill of Rights. With all the 
best intentions, they came up with this regime that went all 
the way down to the detail of saying you must put your contract 
in 12 point Times Roman font. If every State engages in that 
type of regulation, well intentioned, you are going to have 
millions, if not billions, of additional costs that in a 
competitive market will get passed on to the consumer. It is 
going to come out of our pockets. I don't want my bills to go 
up because States have lots of good ideas. If we have good 
ideas, let us nationalize those. Let us have the conversation, 
talk about what the good ideas are, move forward with those, 
and perhaps have a safety valve so that when unanticipated 
situations come up, States do have the flexibility to address 
those issues.
    Mr. Gonzalez. Thank you. It is only 1 minute, and I can 
talk to Mr. Fellman later about the cable and voice and such, 
but I think I have other witnesses that wish to respond.
    Ms. Munns. I would just like to respond to what 
Commissioner Davidson just said about the failed experiment in 
California with the Bill of Rights.
    California began looking at a Bill of Rights for wireless 
because of the significant increase in complaints that they 
had. Their customer expectation was not being met, and they 
started looking at a Bill of Rights in order address this. As a 
result of that, the industry came forward and said let us take 
a crack at getting this solved voluntarily, and made 
significant strides to addressing some of the issues that had 
been raised. That Bill of Rights, that idea I don't think is 
going forward in California. And to that extent, I think that, 
you know, you can call it a failed experiment, but it did have 
a good result, and we didn't have to go to national standards 
to get some voluntary compliance on behalf of the industry.
    Mr. Gonzalez. Thank you all very much.
    Mr. Upton. Mr. Engel.
    Mr. Engel. Thank you, Mr. Chairman. Before I ask my 
question, I would like to acknowledge that Tom Dunlevey of the 
New York State Public Service Commission is in the room. I 
would like to welcome him.
    Obviously, we are soon moving to draft legislation to 
update our telecommunications laws, and as new technologies 
have made older ones obsolete, the rules and regulations that 
govern this industry need to be updated as well.
    The introduction of VoIP has really made a profound change 
in the industry and it is introducing rapidly a new level of 
competition to the voice market. Now soon, we will have a new 
level of competition in the video services market as well, and 
I am committed to personally getting this new competition 
swiftly into the market. But I believe that we need to ensure 
that there is a level playing field, a fair and level 
regulatory playing field, such as must carry public access 
channels and franchise fees and rates. I believe very strongly 
that consumers will benefit when there are multiple entrants 
into the market for communications services, whether it is 
voice or video. Cable is the dominant provider of video, and 
telephone companies are the dominant power of voice.
    So in line with that, I have a question I would like as 
many people who would like to answer it as possible to answer.
    So any of you see where we can streamline the process for 
getting more competitors into the voice and video markets, and 
specifically, what steps are your States or organizations 
taking, and what should we and the FCC--we meaning Congress and 
the FCC should be doing? If anybody would care to answer that, 
I would be grateful.
    Mr. Davidson. I will jump in just briefly on Florida's 
approach.
    Florida has taken the approach that if we remove some of 
these regulatory hurdles that market conditions will be created 
and folks will be encouraged to enter. So Florida has 
deregulated VoIP as provided that broadband, regardless of the 
provider platform is not subject to local government control. 
Recent legislation that is sort of making its way through both 
chambers makes clear that both of those platforms, however, 
remain subject to the State's generally applicable deceptive 
trade practices, consumer business protection, statutes, fraud 
statutes, so that customers sort of are protected and have a 
remedy.
    But what we have seen with that now is that the State is a 
target market for Verizon to come in and build out fiber to the 
home to deliver video. It is one of the largest markets for 
Vonage. We have numerous cable companies offering telephony, so 
we are trying to just sort of as a market principle, remove 
some of those hurdles to competition, and we are seeing in 
Florida that that competition is, in fact, occurring. And I 
know everyone would like to have it all here immediately, but 
there are clearly progressive steps that are occurring in 
Florida, and the competition is coming.
    Mr. Engel. Thank you.
    Mr. Perkins. Congressman. I am sorry.
    Mr. Engel. Go ahead.
    Mr. Perkins. I think as we pursue that area, we need to 
keep in mind that there are large rural areas in this country, 
including Iowa, where it is not economically feasible for cable 
providers or telephone providers to come in and put in DSL. In 
Iowa, we recently--our legislature passed legislation that 
deregulated over time the rates that Quest could charge for its 
residential phone rates, but as a quid pro quo, Quest was told 
you have to get DSL into a lot of different exchanges where you 
don't have it. Quest wouldn't go in there. It wasn't 
economically feasible.
    So while it is great to say in some of these areas, large 
metropolitan areas where everybody wants in, there are a number 
of areas where nobody wants in. The cable provider doesn't want 
to extend its cable out for four customers out in the 
countryside. DSL has limitations on how far it can go. I live 
in the city of Des Moines and I can't get DSL because I am more 
than 3 miles from a switch, but I am not certainly out in rural 
Iowa.
    So I think as the committee looks--the subcommittee looks 
at legislation, it is important to keep in mind that there are 
economies that these providers look at that dictate how much 
they want to do, and there needs to be incentives, I think, 
such as the Iowa legislature just provided to Quest, if you 
want this extra money, you better get your DSL in all of the 
exchanges in Iowa, rather than just the ones that you think you 
can make a lot of money at.
    Mr. Engel. Thank you.
    Mr. Fellman.
    Mr. Fellman. Congressman, I would like to give you an 
anecdotal example of what doesn't work, and then give you--
reiterate something that I said earlier that I think will.
    In Colorado in 1996, the same year that the Telecom Act was 
passed, our general assembly passed legislation that prohibited 
local governments in Colorado from being in the franchise 
business, if you will, with respect to any communications 
service other than cable television. No franchises on any kind 
of communications service other than cable, no charges for 
permit fees, other than the actual cost of administering the 
permit process. No requirements. Companies had the right to be 
basically on public property for free. Do we have more 
broadband in Colorado today than you have in New York or that 
you have in Iowa? Of course not, we don't. The market is going 
to dictate where these services are deployed, and rural 
Colorado ain't the market where they are being deployed first. 
Even outside of the highly concentrated metro area, that is not 
where they are. So to simply say we have got to make 
franchising go away is not going to solve the problem, because 
the companies are going to go where they can make a profit.
    And that brings me back to what Mayor Billings talked 
about, what I mentioned earlier. One way to encourage more 
deployment and more competition is for Congress to make 
absolutely clear in the next piece of legislation that comes 
out of this city that no legislation shall be passed that 
prohibits States or their political subdivisions from 
participating in a provision of telecommunications 
infrastructure and services. And when smaller rural communities 
start getting into the business and showing that it can be done 
and it can be done profitably, then the industry will follow.
    Mr. Engel. Thank you.
    Unless there is anybody else who cares to do----
    Mr. Upton. If you have another question, go ahead.
    Mr. Engel. Well, let me ask Mr. Quam.
    In your testimony, you mentioned the 911 systems and the 
need for new services to work with them. We all agree. I don't 
think there is anyone on this subcommittee or committee who 
wouldn't agree.
    But I want to ask you about the allowing the States to 
impose a fee on these services to support the 911 services. We 
had a situation in New York, you know, Congress has passed 
legislation to clean up the abusive 911 funds, but States can 
opt out if they forego Federal funding.
    So I would like to know, what are the States doing to 
ensure that taxes collected on these existing technologies are 
actually going to upgrade the 911 networks? Has the National 
Governors Association undertaken any kind of creating a 
transparent audit process for States to use? There was an 
instance in New York, actually, where I am from in the Bronx 
where there were four young boys who drowned off City Island. 
They called 911 on their cell phones, but they got through to 
911 but the center couldn't locate them because the 911 funds 
weren't used for their intended purpose. And so that is why I 
am asking this question. Have there been any studies or 
anything you can care to shed some light on this?
    Mr. Quam. The 911 services are absolutely critical to 
Governors and States and having systems that work so when a 
consumer calls, they actually find an emergency provider that 
can find them. I think it is a priority issue for all 
Governors.
    The National Governors Association, although we haven't 
taken on anything like auditing authority or that type of 
oversight, because these really are State programs, we have 
partnered with the FCC to try to help build some best practices 
and have e911 operators and implementers really talking to each 
other and see if we can't get these programs going.
    With regard to some of the issues regarding the fees that 
are collected, because they are State issues, really those 
decisions for the levels and the fees need to be made by the 
State. I do know that several States have made attempts to 
streamline that process or simplify those systems to make sure 
the money that they are collecting is the money that is needed 
to implement those systems. But from a national Governor's 
perspective, the most important thing is actually getting 
systems up and running that work. And that is where most of the 
focus is.
    I think last year's legislation sent an important message 
from Congress regarding the use of those 911 fees. I think 
Governors are on board with that being a real priority to have 
a system that is up and running, and that works.
    Mr. Engel. Thank you. Thank you, Mr. Chairman.
    Mr. Upton. Mr. Bass, you don't have further questions?
    Mr. Bass. Can I ask one more?
    Mr. Upton. Yes, you can.
    Mr. Bass. This may be pretty fundamental.
    Why do we need franchising for new cable services when we 
don't seem to need it for anything else that we provide, for 
example, wireless voice data? Anybody have some observation? 
What is the difference?
    Mr. Fellman. Congressman, the primary difference in at 
least some of the examples you just--comparison examples you 
mentioned are the use of public rights of way. We need to 
remember that the facilities that most of the cable systems are 
located on public property whose primary purpose is to safely 
and efficiently move traffic of all kinds. And when streets are 
dug up and not repaired properly, there is a whole host of 
problems from the surface problems with traffic safety issues 
to the problems caused by cuts in electric lines and gas and 
water pipes. So there is a whole lot of regulatory oversight 
inherent in the use of public rights of way for a private 
company to operate its business, when that clearly is not the 
primary use that that property was intended for.
    The other issues--and we have talked about them, so I don't 
want to be redundant----
    Mr. Bass. Yes.
    Mr. Fellman. [continuing] but the 5 percent franchise fee 
is not the only compensation for the use of that rights of way. 
I think Congress has, for a long time, recognized whether it be 
broadcasting where there were public interest obligations in 
return for use of the public airwaves, or the public set asides 
for satellites now, or the social obligations I have talked 
about and some of the other witnesses have talked about. With 
cable, a part of this is compensation and a recognition and a 
policy in this Nation that these media are essential tools for 
the use of our democracy by our citizenry. And I think that is 
an important concept to remember and to ensure that it 
continues with the new technologies we are going to be 
utilizing in the future.
    Mr. Bass. Okay.
    Mr. Upton. Well thank you. Thank you all for your 
testimony. We have had a number of hearings on this issue, as 
you and certainly those in the press know, but others that have 
watched. I think we have had four lengthy hearings over the 
last 2 months. I think that the record is a good one. Our goal 
is to have a bipartisan effort for sure, and continues that we 
will try to get this legislation to the House floor by our 
August break. I am committed to seeing that we do that in a 
timely manner. And we appreciate your thoughts and interests, 
and the participation of all the members of this subcommittee.
    And with that, we stand adjourned.
    [Whereupon, at 4:19 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]

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