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



 
  HEARING ON POLITICAL SPEECH ON THE INTERNET: SHOULD IT BE REGULATED?

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

                                HEARING

                               before the

                   COMMITTEE ON HOUSE ADMINISTRATION
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

           HEARING HELD IN WASHINGTON, DC, SEPTEMBER 22, 2005

                               __________

      Printed for the use of the Committee on House Administration



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                   COMMITTEE ON HOUSE ADMINISTRATION

                           BOB NEY, Chairman
VERNON J. EHLERS, Michigan           JUANITA MILLENDER-McDONALD, 
JOHN L. MICA, Florida                    California
CANDICE MILLER, Michigan               Ranking Minority Member
JOHN T. DOOLITTLE, California        ROBERT A. BRADY, Pennsylvania
THOMAS M. REYNOLDS, New York         ZOE LOFGREN, California
                                 ------                                

                           Professional Staff

                     Paul Vinovich, Staff Director
                George Shevlin, Minority Staff Director


       POLITICAL SPEECH ON THE INTERNET: SHOULD IT BE REGULATED?

                              ----------                              


                      THURSDAY, SEPTEMBER 22, 2005

                          House of Representatives,
                         Committee on House Administration,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 9 a.m., in room 
1310, Longworth House Office Building, Hon. Robert W. Ney 
(chairman of the committee) presiding.
    Present: Representatives Ney, Ehlers, Miller, Millender-
McDonald, and Lofgren.
    Staff Present: Paul Vinovich, Staff Director; Karen 
Christian, Counsel; Audrey Perry, Counsel; Samantha Drudge, 
Staff Assistant; George Shevlin, Minority Staff Director; Tom 
Hicks, Minority Professional Staff Member; and Jannelle Hu, 
Minority Professional Staff Member.
    The Chairman. The Committee will come to order.
    The Committee is meeting here today to hear testimony on 
the subject of regulation of political speech and activity on 
the Internet. We have a very interesting group of witnesses 
here today to testify. I really look forward to hearing from 
them.
    This is a very controversial subject--well, everything in 
this building is controversial, but this is horrifically 
controversial. Groups and people really take a stand on it.
    But before we get to our witnesses, I want to provide the 
general public with a little background on the subject so those 
listening know where we are in the process and what could be at 
stake. The Bipartisan Campaign Reform Act, McCain-Feingold, and 
Shays-Meehan, required the Federal Election Commission to 
develop regulations to implement this Act. The Commission 
determined Congress didn't intend for BCRA to cover Internet 
communications, and therefore adopted regulations that exempted 
them.
    Two of the Members of the House, pleading that the FEC's 
regulations didn't follow the intent of BCRA, sued the 
Commission. The Court agreed with the Members of Congress and 
ordered the FEC to rewrite the rule. As a result of this 
lawsuit and court decision, the FEC was forced to rewrite the 
rules that covered communications on the Internet. That new 
rulemaking began in March of 2005.
    While this new rulemaking was going on, some Members of 
Congress made clear that they didn't intend for BCRA to cover 
the Internet, and they did not want the FEC regulating these 
communications.
    In March, our good friend, Congressman Conyers, and 13 of 
his colleagues wrote to the FEC seeking exemption for the Web 
logs or blogs. I would like to include in the record a letter 
and press release from the gentleman from Michigan. Dated March 
11, entitled, ``Representative Conyers Leads Call on FEC for 
Campaign Finance Exemption for Web Blogs.''
    [The information follows:]

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    The Chairman. Identical bills were also introduced in both 
bodies to preserve the exemption--in the Senate by minority 
leader Harry Reid, and in the House by Jeb Hensarling. Their 
bill language was actually adopted by this Committee when we 
inserted it in the Pence-Wynn bill reported by the Committee.
    These bipartisan congressional endorsements with Members 
from both sides of the aisle, in both the House and the Senate, 
are the exception, and shows there are still some issues on 
which both sides of the aisle obviously can agree.
    We will later hear from two witnesses who operate blogs, 
one conservative and one liberal--or if you want to classify 
yourselves a different way, that is fine--but who probably may 
not agree on anything philosophically except they don't want 
the FEC to be regulating their businesses or what is said on 
the Web sites.
    So the debate here today is really not between Republicans 
and Democrats or liberals and conservatives. It is between 
those who favor regulation on this issue and those who don't.
    A lot of the reform community favor regulation. They 
believe that Internet speech has to be regulated in the same 
manner as other speech or we would create a loophole that would 
allow people to evade the Campaign Finance Reform Act. This 
prospect doesn't frighten those who oppose regulation. What 
frightens them is the prospect of requiring bloggers to answer 
to a Federal agency if regulations are extended to cover what 
they can or cannot say on the Web sites.
    So, I think we have a real clash here of two fundamentally 
different views of the world, one being that regulation is 
necessary to preserve the health of our democracy, and the 
other that freedom from regulation is required for democracy to 
flourish. With the FEC in the midst of a rulemaking on the 
subject and the Congress considering pending legislation, we 
have a great opportunity today to just air the arguments and 
where people stand and what they think. I really look forward 
to the testimony.
    I want to thank our Ranking Member, the gentlelady from 
California; and I would note that we had a wonderful historic 
event together yesterday with Congressman Fattah, the unveiling 
of the Congressman Rainey portrait, who was the first seated 
African American elected and seated in the House. We had a 
great ceremony, and the Rainey family actually met each other 
and were present. Some of them had not ever met each other. It 
was a great day with our Ranking Member; and, as usual, we 
appreciate her interest in legislation.
    Ms. Millender-McDonald. Thank you so much, Mr. Chairman, 
for your continuing to bring people together as you did the 
Rainey family yesterday. I was amazed that many of them had not 
met each other, and so they came to meet each other yesterday 
at that great event put on by our colleague from Pennsylvania, 
Congressman Fattah.
    Regretfully, because this is the annual legislative 
conference of the Congressional Black Caucus Foundation, I am 
going to have to leave after I give my opening statement; and I 
regret that. But then I have a group of young 11-year-olds, 11- 
and 12-year-olds who will be doing demonstration flying with 
the military and--through Boeing, and so I have got to get out 
to this flying field wherever I am flying to. I have been 
flying all morning, but I do want to thank the chairman for 
scheduling this oversight hearing, and my leaving is not 
because of a disinterest, but it is because of the multiple 
schedule that I have today.
    Being from California, I have seen firsthand how the 
Internet has become an innovative and powerful medium. A little 
more than a decade ago, when public use of the Internet was 
still in its infancy, people around the world were just 
beginning to use this new technology to instantaneously 
communicate with one another. Today, the Internet has grown 
into a powerful tool for commerce, information, and the media.
    Looking back on this last Presidential election cycle, some 
of the positive consequences of enacting the Bipartisan 
Campaign Reform Act, or BCRA, were the democratization of 
grassroots involvement in this process and broadening of 
political free speech and the grassroots efforts to increase 
voter turnout, all of which were facilitated or made possible 
by the use of the Internet. Federal officeholders and their 
political parties were forced to appeal to a broader audience 
of small donors, and the Internet was tapped for that purpose.
    The Internet was also used by Federal candidates to get 
their message out and to become more involved in grassroots 
activities. Presidential candidates used the Internet to raise 
substantial amounts of money. Internet fundraising is much more 
efficient and much more--less costly than conventional outreach 
such as hiring phone banks, producing and airing TV ads and 
sending out mass mailers. All of the resources raised by the 
campaign is fully reported to the Federal Election Commission 
and publicly disclosed.
    Millions of small, first-time donors recently became 
involved with the political process by using the Internet. 
Americans were not only able to contribute to candidates using 
the Internet, but they were also able to learn about the 
candidate's position on issues when they arose and not wait for 
a news cycle. The Internet is leveling the playing field 
between everyday Americans and big donors and between the 
candidates and the news media which covers them.
    Hurricane Katrina destroyed the Gulf Coast, flooded 80 
percent of the City of New Orleans, and caused the worst 
disaster in this nation's history. The Internet helped to raise 
millions of dollars in relief for the Red Cross and other 
relief organizations; and, as a result, the first beleaguered 
evacuees might be able to return to their city and their homes.
    But for every legitimate charity working miracles, there 
are hucksters and scam artists trading on America's generosity 
and community spirit; and this is an issue I want to raise with 
our witnesses today, or I will raise it later on.
    As I stated earlier, the Internet facilitated the 
participation of millions of new low-dollar political 
contributors. This was a remarkable and extraordinarily 
positive development. Regretfully and inevitably, as complaints 
to the FEC have disclosed, a few criminals took advantage of 
the enthusiasm of ordinary citizens to participate in our 
democracy and stole their contributions through phony political 
Web sites. These sites, by mirroring legitimate candidate 
sites, were able to deceive an unknown number of people.
    Unless addressed, this type of crime stands to undermine 
the confidence of people who would otherwise be willing to use 
the Internet to contribute to the candidates and parties of 
their choice.
    The Commission's normal enforcement procedures are not 
designed to respond in a timely manner to such crimes. 
Therefore, I would urge the Commission to develop procedures 
and to work with the private sector, the political committee, 
and other governmental agencies to address this problem and 
this type of fraud. I would be interested in hearing from you 
in addressing this very critical and serious issue.
    Mr. Chairman, thank you again for this hearing. Don't think 
that you are alone because there are--no other members will be 
on your side. But we do recognize the importance and the 
seriousness of this issue.
    Thank you.
    The Chairman. I thank the Ranking Member, the gentlelady 
from California, for also readjusting your schedule. You are 
not actually going to fly a plane, are you?
    Ms. Millender-McDonald. Heavens, no.
    The Chairman. I wanted to make sure. Thank you, and I think 
it is important to have the hearing for the record. Of course, 
the record will be open for follow-up questions, so I want to 
thank you so much for your support.
    We will start with the first panel today. We are fortunate 
today to have with us three distinguished commissioners from 
the Federal Election Commission who discussed their ideas and 
proposals regarding the regulation of political speech on the 
Internet.
    First, we will hear from Chairman Scott Thomas, followed by 
Vice-Chairman Michael Toner and, finally, Commissioner Ellen 
Weintraub.
    We look forward to your remarks. Welcome all three 
commissioners today.

   STATEMENTS OF SCOTT E. THOMAS, CHAIRMAN, FEDERAL ELECTION 
COMMISSION; MICHAEL E. TONER, VICE CHAIRMAN, FEDERAL ELECTION; 
    AND ELLEN L. WEINTRAUB, COMMISSIONER, FEDERAL ELECTION 
                           COMMISSION

    The Chairman. We will hear from the Chairman first.

                  STATEMENT OF SCOTT E. THOMAS

    Mr. Thomas. Chairman Ney, Ranking Member Millender-McDonald 
and members of the committee, thank you for inviting me and my 
colleagues to testify on the proper reach of any regulation of 
campaign activity on the Internet. I plan to read just a few 
snippets of my prepared statement, and I would ask that the 
full statement be entered for the record.
    I hope here to make a few basic points.
    I would add--since the ranking member does have to leave, I 
would just jump outside of my prepared remarks to indicate I 
think there are some interesting opportunities to work with the 
private sector to help develop seals of approval, if you will, 
that indicate a particular Web site is an official Web site. So 
I would be very happy to sort of explore along with your staff 
and your office ideas along those lines.
    There is actually a group that I know of that is working on 
that. It is called Election Mall Technologies, and they have 
started to develop and work with States to develop, in essence, 
an official seal of approval so people know that a particular 
Web site is the real deal.
    Ms. Millender-McDonald. That is encouraging. Thank you so 
much.
    Mr. Thomas. Now back to where I was initially leading.
    I hope to make a few basic points.
    First of all, the Commission's 2002 regulations, in my 
view, mistakenly adopted a total carveout for Internet 
communications that exempts from core statutory provisions even 
paid campaign advertising.
    Second, there are ways for the Commission to rectify the 
situation by regulating only Internet activity that raises the 
concerns underlying the core statutory provisions while leaving 
the vast majority of the Internet activity, including blogging, 
uninhibited.
    Third, Congress I think should await the Commission's 
effort and should not compound the current problem with 
enactment of the same total carveout approach.
    Now, as the Chairman referenced, the Commission is in the 
midst of a rulemaking concerning the proper reach of regulation 
regarding political activity on the Internet. We have put out a 
notice of proposed rulemaking with several options. This summer 
we had a couple days of hearings, and we hope to be able to 
adopt final rules on this topic by the end of the year.
    The regulations adopted by the Commission in 2002 created a 
very broad exemption from several statutory restrictions for 
Internet activity. It is similar to the exemption adopted by 
this committee when considering the Pence-Wynn bill, and the 
Commission has been in litigation over this broad exemption 
since October of 2002.
    The broad exemption the Commission adopted leaves serious 
gaps in the statutory system put in place by Congress to 
require hard money funding of State or local party 
communications supporting particular Federal candidates and to 
limit or prevent certain contributions on behalf of Federal 
candidates and committees and to require disclaimers on 
political advertising.
    Experience teaches that political professionals will 
exploit any perceived loopholes. For example, the national 
party soft money loophole started as a minor blip in the 1980s 
and exploded to a half billion dollar binge by the 2000 
election cycle. Internet advertising and e-mail sent to 
millions are themselves showing signs of growing in terms of 
usage and costs.
    I would interject here we had a witness testify, Mr. 
Michael Bassick. He is with the Online Coalition, and he told 
us in 2004 alone over $14 million in Internet campaign 
advertising was purchased. He said this represented a 3,000 
percent increase over the amount of paid Internet advertising 
from the 2000 cycle.
    So we have a growing development in terms of paid Internet 
advertising, and I would suggest that carefully crafted 
regulation on this topic is in order.
    I won't belabor with you the details of the legal problems 
with the Commission's approach except to note that really there 
is only one provision in the statute that defines the term 
public communication and uses it; and it is a provision that is 
designed to require State and local party committees to use 
hard money to pay for certain public communications that 
promote, support, attack or oppose a Federal candidate. That is 
where the Commission adopted this broad, across-the-board 
exemption for, in essence, any Internet activity. This arguably 
leaves State and local parties free to fund hard-hitting, 
candidate-specific attack ads placed for a fee on popular 
Internet Web sites, no matter the cost, as some sort of 
allocable expense that can be paid for, in large part, with 
soft money.
    Second, when later crafting new regulations specifying when 
coordinating a paid communication with a candidate or committee 
makes the communication an in-kind contribution, the Commission 
unnecessarily adopted a content requirement which, in turn, 
adopts that restricted public communication definition and 
thereby excludes all communications over the Internet. This 
leaves corporations or unions or foreign governments and 
wealthy individuals free to fund, without regard to the 
statutory limits and prohibitions, Internet communications of 
any sort in full coordination with Federal candidates and 
committees.
    Imagine a huge cooperation or union being able to fully 
fund the Internet ad campaign or million person e-mail 
operations of a cooperating Presidential or congressional or 
party committee.
    Now, the third mistake, in my view, of the Commission came 
when drafting the post-BCRA regulations dealing with 
disclaimers. Though the statute requires notice identifying the 
payor and indicating whether or not there is candidate 
authorization on any type of general public political 
advertising, the Commission again adopted its restricted public 
communication definition and thereby excluded communications 
over the Internet. The result is that candidates, party 
committees and other persons who pay for Internet campaign ads 
on popular Web sites do not have to follow statutory disclaimer 
rules.
    In sum, as a result of the decisions made by the Commission 
in the rulemaking process, party committees will be using soft 
money to pay for Internet ads bashing candidates; corporations, 
unions, foreign nationals and wealthy individuals will be 
paying for Internet-related expenses of requesting candidates 
and parties; and the public won't have a clue who is paying for 
virtually all Internet advertising they will see.
    I would say this is not inconsequential or hypothetical. A 
search of the FEC database shows about $25 million on Schedule 
B disbursement schedules which describe with terms like Web or 
Internet or e-mail--$25 million. And that is just really what 
we can see because people have happened to label those kinds of 
activities that way. So there is a fair amount of activity out 
there.
    The invalidated regulations of the Commission would 
essentially gloss over this significant financial activity and 
the potential for soft money and other otherwise restricted 
sources being used to pay for it.
    So we are in the process of this rulemaking. I think we are 
working pretty well to try to correct the problem that I have 
identified.
    The focus of any Internet regulation should be those 
Internet campaign ads placed on Web sites that normally charge 
a commercial fee for such placement. That is the focus of the 
Commission's proposed regulation that we put out.
    For ads placed for a fee on another person's Web site, 
State and local parties would have to follow the funding 
restrictions intended for public communications in the statute; 
all persons who coordinate such ads with a candidate or party 
would have to treat them as contributions or coordinated 
expenditures; and, third, disclaimers saying who paid for them 
and whether they were authorized by a candidate would have to 
be included, unless it was otherwise impractical.
    Importantly, under the Commission's proposed rules, no 
other Internet communication would be regulated as a public 
communication. Thus, State and local parties would not have to 
apply the new BCRA soft money prohibition to material placed on 
their own Web sites or to e-mail activity. Likewise, persons 
coordinating with candidates or parties regarding material 
placed on such persons' own Web sites would not have to worry 
about triggering the coordinated communication rules.
    With regard to disclaimers for persons other than political 
committees, the Commission's proposed rules would not require a 
disclaimer under any circumstances if the communication did not 
include express advocacy or solicitation of Federal 
contributions. Beyond that, other than for paid ads placed on 
someone else's Web site, the proposal would only require a 
disclaimer on e-mail sent to more than 500 recipients if the 
sender paid for a mailing list to accomplish that mailing. 
Thus, for material placed on one's own Web site and for e-mail 
that is sent to 500 or fewer persons or to a list developed 
without having to purchase the names, there is no disclaimer 
requirement.
    Taken as a whole, the Commission's proposed regulations 
already described move toward a reasonable balance. They get at 
the heart of the problem noted by the court in Shays v. FEC and 
at the same time leave wide latitude for individuals, bloggers 
and others to undertake Internet political activity.
    I would say to further assure that vast array of 
individuals who use the Internet for political speech that the 
Commission intends to leave individuals free to operate outside 
the relatively few constraints noted above, the Notice of 
Proposed Rulemaking suggested several revisions to other 
regulations. For example, we clarified that we would expand the 
so-called volunteer activity allowance to independent activity, 
not just coordinated activity.
    This is important because, heretofore, the Commission has 
felt compelled to treat noncoordinated or independent activity 
on the Internet as something that is still subject to the 
current regulations on independent expenditures. So at some 
point a person would be subjected to the rule that only hard 
money can be used to pay for independent express advocacy 
communications and at a $250 threshold a person has to start 
reporting independent expenditures. So our intent with this 
rulemaking is to clarify that we will work with the volunteer 
allowance that is in the statute and make it extend to 
independent activity so that independent Internet activity 
likewise will have freedom from the independent expenditure 
restrictions.
    We also put in some provisions to clarify that our current 
rules on allowing an individual to use the employer's 
facilities will extend to use of computer facilities and 
Internet facilities at the workplace.
    We also put in some rules to clarify that we intend to 
apply the existing media exemption to Internet activity.
    So we hope those additional proposed revisions would assure 
the regulated community that our focus is only on these paid 
ads placed on someone other's Web site.
    We received over 800 comments. As I said, we held 2 days of 
hearings, and we are right now going over the voluminous record 
and trying to come toward a resolution on that particular 
rulemaking.
    In closing, I would just urge that the committee not adopt 
the approach that the committee approved in June, just because 
it will fall into the same set of problems that I described 
when we went through the regulation process. That broad 
exemption, at least in my mind, does not work well.
    I would just finish by saying the Internet, we all 
understand, is a wonderful tool for political activity. Its 
accessibility and generally low cost are invigorating the body 
politic. By the same token, its increased usage by candidates 
and parties and the increased resources being put into this 
technology for campaign advertising suggests a need to be 
cautious about attempts to exempt all Internet activity from 
Federal campaign finance laws. I hope Congress can await the 
outcome of the Commission's regulation proceeding.
    I thank the chairman and the ranking member and the members 
of this committee for the opportunity to testify, and I assure 
you the Commission stands ready to assist the committee further 
in any way it would find helpful.
    The Chairman. Thank you.
    [The statement of Mr. Thomas follows:]

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    The Chairman. Vice Chairman Michael Toner.

                 STATEMENT OF MICHAEL E. TONER

    Mr. Toner. Thank you, Mr. Chairman. I want to thank you and 
the ranking member and all members of the committee for 
inviting me to testify here today on Internet regulation.
    I want to emphasize three things today:
    First, there is no indication that Congress intended for 
the many prohibitions and restrictions within the McCain-
Feingold law to apply to the Internet. As I detail in my 
written testimony, the Internet is not subject to McCain-
Feingold under the plain meaning of the statute.
    Congress identified a large number of mass media that are 
subject to McCain-Feingold restrictions, including broadcast, 
cable and satellite communications, newspapers, magazines, mass 
mailings, telephone banks. Even outdoor advertising facilities 
are mentioned in this statute. Virtually every type of mass 
media in this country was identified by Congress in this key 
statutory provision except for one, the Internet.
    I do not believe that the statutory omission was an 
accident or an oversight. Rather, I believe it was a conscious, 
informed judgment by Congress that the World Wide Web should 
not be subject to the many restrictions and prohibitions that 
McCain-Feingold applies to other types of mass communications.
    There is also no evidence in the legislative history that 
Congress intended to restrict online politics when it enacted 
the McCain-Feingold law. To my knowledge, during the lengthy 
floor debates on this legislation not a single Member of 
Congress, including the legislation's sponsors, indicated that 
the Internet would be restricted or regulated in any way in the 
McCain-Feingold law.
    Given that such a result would potentially affect the 
activities of millions of online political activists, the fact 
that there was no floor discussion of the subject is powerful 
evidence, in my view, that Congress did not intend to restrict 
the Internet when it passed the McCain-Feingold legislation. 
So, given the plain meaning of the statute and its legislative 
history, in my view the FEC was correct to exempt the Internet 
from its regulations implementing the McCain-Feingold law.
    Second, there are very strong policy reasons that support 
in my mind exempting online political speech from government 
regulation and restriction. As many commentators have noted, 
the Internet is virtually a limitless resource where millions 
of Americans communicate every day at virtually no cost. Unlike 
television and other traditional media, which generally are 
scarce and have significant financial barriers to entry, an 
individual can communicate with millions of people online at 
little or no cost in an interactive and dynamic manner; and the 
speech of one person does not and cannot interfere with the 
speech of anyone else.
    Published reports indicate that, as of August, 2005, there 
were over 14 million Web blogs and over 1.13 billion links in 
cyberspace, that approximately 80,000 new blogs are created 
every day, which works out to about one every second, that the 
blogosphere continues to double about every five and a half 
months, that approximately 70 million American adults log on 
the Internet every day and that Americans send out 
approximately 43 million e-mail messages per day. In light of 
this, it is simply not possible, in my view, for any person or 
entity, no matter how wealthy they may be or how much money 
they can spend, to dominate political discourse on the 
Internet.
    By contrast, if a multi-millionaire decides to spend 
millions of dollars on television or radio advertising to try 
to elect or defeat a Federal candidate, that person could buy 
up much of the available advertising time and could make it 
difficult for anyone else to be heard on those traditional 
media. But such dominance, in my view, is not possible on the 
Internet, given its extraordinary size and accessibility.
    Third, there is no constitutional basis, in my view, for 
the Federal Government to restrict online politics. The primary 
constitutional basis for campaign finance regulation is 
preventing corruption or the appearance of corruption. Where 
campaign finance regulations meant to ensure that money and 
politics does not corrupt candidates or officeholders or create 
the appearance of corruption, such rationales cannot plausibly 
be applied to the Internet, given its size, affordability and 
accessibility.
    As bloggers Markos Moulitsas Zuniga and Duncan Black 
pointed out to the FEC earlier this year, the purpose of 
campaign finance law is to blunt the impact of accumulated 
wealth on the political process, but this is not something that 
occurs online. While wealth allows a campaign or large donor to 
dominate the available space on TV or in print, there is no 
mechanism on the Internet by which entities can use wealth or 
organizational strength to crowd out or silence other speakers. 
In sum, the Internet fulfills through technology what campaign 
finance reform attempts through law.
    On the broadest level, the question to be decided in the 
months ahead is whether the online political speech of every 
American will be free. I ask, must every aspect of American 
politics be regulated by the Federal Election Commission? Can 
there not be any part of our politics that is not subject to 
Government review, investigation and potential enforcement 
action? I don't view these as rhetorical questions. I view them 
as going to the heart of the debate of whether the Internet 
should be regulated by the Federal Election Commission.
    I remain hopeful that Congress and the Commission will take 
whatever steps are necessary to ensure that every American can 
engage in online politics free of Government regulation and 
restriction.
    I want to thank again the committee for inviting me to 
testify. I look forward to the committee's questions.
    [The statement of Mr. Toner follows:]

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    The Chairman. Commissioner Weintraub.

                STATEMENT OF ELLEN L. WEINTRAUB

    Ms. Weintraub. Mr. Chairman, Representative Miller, it is a 
pleasure to be here. You have my written statement. I ask that 
it be entered into the record. I won't read it to you.
    Let me say at the outset that I got to the Commission after 
most of the rulemakings that were necessitated by BCRA had 
already been completed; and, as you have already heard and I 
think will continue to hear today, a lot of people who were 
involved in that process--at the Commission and on the outside 
as commentors feel very strongly about those regulations, 
whether they were right, whether they were wrong.
    I wasn't there, and I don't have a dog in that fight, and I 
am not here to relitigate that. I am also not here to lobby you 
over whether you should or should not pass a law governing the 
Internet and politics. But I am here to talk to you about where 
the Commission finds itself today.
    And where we are today is a place where, without 
congressional action, the Commission has no choice. We are 
under a judicial mandate to issue a regulation addressing at 
least some aspects of political speech on the Internet. Barring 
statutory change, that is exactly what we will do, although I 
believe the Commission should and will take a very restrained 
approach to any such regulation. But if you don't want us to 
issue that regulation, then we need a change in the law.
    I think that, I want to assure you that we are, as a group, 
and I know I am personally, committed to taking a very 
restrained approach to any regulation that we pass that governs 
people's use of the Internet. We are not interested in creating 
a new category of Internet outlaws. I am not interested in 
having anyone out there sitting at their computer, whether it 
is at their home or their office, about to send out a message 
and thinking, well, before I press that send button do I have 
to call my lawyer or, God forbid, read an FEC advisory opinion? 
I think that would be a very bad result, and we will do 
everything within our power--I will do everything within my 
power to make sure that is not the result of our regulations.
    In our proposed regulation, the only Internet activity that 
we propose to cover as a regulated public communication is an 
advertisement that is placed for a fee on another person's Web 
site; and we tailored that on purpose to be as narrow as we 
thought we could while still complying with the judge's 
concerns.
    Now I will point out that we received some testimony during 
our hearing that Internet ads can be placed very cheaply, as 
cheaply as $50 for 50,000 hits on some sites, according to the 
Center For Democracy and Technology; and it has been suggested 
to us that there perhaps ought to be some kind of a minimum 
threshold before we would look at even paid advertising. The 
threshold that has been suggested by several witnesses is 
$25,000. That might be a perfectly good idea, but I don't think 
we can do that, again, without a statutory change. So I will 
just suggest that to you that if you are interested in that 
approach, that is another area where we would need to see 
legislation.
    Our proposed regulation also addressed disclaimers on e-
mail, only because we have a regulation on the books that I 
believe is vastly overbroad, and I think we need to pare that 
down.
    Right now, if an individual sends out 500 substantially 
similar unsolicited e-mails that advocate the election or 
defeat of a candidate, it requires a disclaimer. And when I 
think about how many addresses people routinely keep in their 
e-mail address books--I know I have over 500--people belong to 
listserv groups that have many, many names on them; and it is 
very, very easy, I think, for someone who is involved and 
excited about politics to, when it gets close to the election, 
decide to send out an e-mail to everybody in their address 
book, which could very well be over 500 names, saying please 
vote for my favorite candidate or vote against this other guy.
    For us to say that that would require a disclaimer or that 
the Federal Government has any interest in regulating that kind 
of e-mail I think is ridiculous. So I think we need to change 
the regulation on the books.
    The proposal we have made is to import a commercial 
transaction requirement onto that so, unless the individual had 
paid for their mailing list, which most individuals wouldn't 
do, they would not have to worry about that disclaimer 
requirement. But it has been suggested that that is not enough, 
and I am still contemplating, and I am looking at this issue.
    I think that it is quite possible that we might want to 
repeal that entire disclaimer regulation as it applies to e-
mail except insofar as it would govern political committees, 
candidate committees, party committees, all political 
committees so that individuals would never have to be concerned 
about that, no matter the source of their address lists.
    The proposal also makes clear a couple of things that I 
think are already true, but perhaps, given all the attention to 
this, people using the Internet would feel more comforted by 
seeing it in writing--maybe not--and that is that the media 
exemption does apply online. Online publications are given the 
same protection that paper publications are and that the 
volunteer exception that is in our rules does cover 
individuals' use of computers in their own residences, on their 
own equipment, or on publicly available equipment such as in 
libraries or, in many instances, on corporate or labor union 
equipment that they otherwise have access to that they are free 
to use under the terms of their employment or the relationship 
with their union for nonbusiness purposes.
    A lot of people are concerned that the way our regulations 
are written, this would limit individuals' use of those kinds 
of computers to 4 hours a month, which isn't a lot of time. No 
witness could come up with any reason why we would want to 
import that kind of restriction, and I don't see any reason to 
do so. So I am also looking at whether our rules are already 
clear enough on that, that this 4-hour limit wouldn't apply or 
whether we need to specifically broaden them.
    But the argument has also been made that perhaps we don't 
want to even go so far as to address the Internet in this 
context. Because even by virtue of exempting activity, we 
impliedly say that they are under our jurisdiction; and that is 
a debate that is ongoing at the Commission as well as outside.
    Let me say couple of words about bloggers, because the 
bloggers have generated and received a lot of attention in this 
debate.
    No one wants to regulate the bloggers. I think that is 
pretty clear now. But some commentors pointed out that blogging 
is only one form of communication technology that currently 
millions of people use, but there are many other ways that 
people use the Internet to communicate. And when we--if we are 
going to craft an exemption, we ought to make it broad enough 
that it is not limited to just a technology that happens to be 
popular today but also have it broad enough that it would cover 
the way people will continue to use the Internet next year and 
the year after that, or the way things change online, tomorrow 
and the day after that. So I think we want to be technology 
neutral in our approach, and an exemption for bloggers would 
probably not be broad enough.
    In addition, some of the bloggers have asked that they be 
allowed to incorporate for liability purposes the way political 
committees can without incurring all the corporate 
restrictions. I think that is an excellent idea. I would be 
happy to pursue that. I am not sure we can do that in the 
context of this rulemaking, given the requirements of the 
administrative procedure act for noticing what we do. The 
courts have been very strict with us on those requirements, and 
I think we might have to notice that in a new rulemaking, but I 
am very interested in pursuing that because I see no reason not 
to do it.
    One other issue that has come up with bloggers, in the last 
election a couple of bloggers received payments from 
candidates, and that became controversial, and some people have 
suggested that those payments should be disclosed by the 
bloggers themselves.
    However, we do not normally require disclosure by 
commentators of payments they receive by campaigns. It is 
usually the campaigns that disclose those payments. And I don't 
think that we--for myself, I personally would not support a 
rule that imposed a new requirement for people who comment on 
the Internet that does not otherwise exist for people who 
comment on television or newspapers or in any other forum.
    One other sort of technical point on the republication of 
campaign materials, which is generally covered under the law 
and is regulated. On the Internet, it takes on a whole 
different character because it requires virtually no cost or 
effort to cut and paste something or to add a link or to 
forward something that you have received from another source 
online. It is very different in character than Xeroxing a bunch 
of papers and then stuffing them in envelopes and folding them 
and addressing them and stamping them and buying the stamps. 
There is a lot of effort that goes into that, and it just 
doesn't track what happens on the Internet.
    So I think we ought to make clear that whatever our rules 
are in other contexts for republishing campaign materials that 
they would not apply in the same way to linking and forwarding 
and cutting and pasting online.
    I think we can all agree that the Internet is a potent and 
dynamic tool for fostering political debate and that any 
regulation we undertake should proceed on a ``less is more'' 
theory. We need to be very narrow and focused and restrained, 
and I am committed to doing it that way. The Internet brings 
people together who can't leave their house and or who live in 
faraway places and provides them with a forum where they can 
get together and talk about the future of our Nation, and who 
would want to interfere with that? I know I don't.
    I thank you for your attention. I am happy to answer any 
questions.
    The Chairman. Thank you.
    [The statement of Ms. Weintraub follows:]

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    The Chairman. I have a couple of questions now. I want to 
move on to both members who are here to ask questions and come 
back and still have some left.
    We will start with you, Commissioner Weintraub, and maybe 
someone else can answer. What is the difference between a 
blogger or a web site or what the courts said you ought to 
regulate? I know that the authors of BCRA when asked the 
question, both House and Senate, do you support regulating 
bloggers, said no. But they obviously sued the FEC to have 
regulation.
    Ms. Weintraub. General public political advertising. And I 
think what this debate concerns is what is advertising? What we 
have--the way we have proposed to do it in our rules is that we 
would only cover ads that are placed for a fee on somebody 
else's Web site, which would not be the case for bloggers 
sitting at their computers and sending out their own opinions. 
But, you know, it could be defined in a more capacious way. I 
don't think we have any intention of doing so.
    The Chairman. The question eventually somebody is going to 
have to try to answer, because--well, I will let the other two 
gentlemen comment.
     Mr. Toner. Thank you, Mr. Chairman; and I think 
Commissioner Weintraub is absolutely right. That was sort of 
the key statutory phrase that the court drew upon. But I have 
to note that the court decision is not in any way limited to 
paid advertising. In fact, nowhere in that decision is there 
any suggestion that if the FEC takes care of paid advertising 
it is in good shape.
    The Chairman. So what did the court tell you you have to 
do?
    Mr. Toner. It validated the blanket exemption for the 
Internet and said you have got to regulate at least some 
aspects of it in some way.
    The Chairman. So this is pretty wide open as to what you 
can get restricted or not.
    Mr. Toner. Right. It is always hard to know how these 
courts are going to react, but there is a real possibility of 
additional litigation, even if regulations along these lines 
are adopted.
    But the other point I wanted to make--and I think there is 
no question that the Commission's proposals are very restrained 
as compared to others that could have been made, and I think 
that was a very healthy development. But, you know, as my 
written testimony indicates, I do think there would be a number 
of complexities, even under a narrowly tailored regulation.
    But my bigger point here is that it is the exercise of 
jurisdiction in the first place that, in my view, would be 
problematic. Because if the history of campaign finance 
legislation is repeated in the future, the regulation of today 
will lead to broader regulation tomorrow. We have seen it over 
and over in different areas of the law. And if the Congress 
believes that the Internet is of a different nature than other 
mass media, doesn't have the same potential for corruption 
because of its accessibility, its affordability, its breadth, 
this is the opportunity to stand firm on that and make clear 
there will be no regulation of this medium.
    Mr. Thomas. Mr. Chairman, thank you.
    I would just note a couple things. As I read the court 
decision, when it got around to the Internet exception it was 
dealing with that part of the public communication definition 
that ends with the phrase ``any other form of general public 
political advertising.'' and in so many words the Court said, I 
leave it to the Federal Election Commission to properly 
interpret what Internet activity fits within the confines of 
that phrase, ``any other form of general public political 
advertising.'' so that is why we are focusing on this paid 
advertising prong.
    With regard to blogs, I have to also mention when we were 
doing the hearings we had lots of folks come through; and the 
fellow who has set up Daily Kos, which is a very popular Web 
site these days, was in a conversation with another witness who 
you will be hearing from today, Larry Noble; and they were 
going back and forth. But I gathered that Daily Kos, which is a 
blog, they post comments and responses to comments, and they go 
on and on quite a bit, and they cover lots of topics, but they 
also, apparently, accept advertising. So you are starting to 
see a bit of a blend, where some of the blogs are making a go 
of it commercially by offering up advertising.
    You should inquire, I guess, from Mr. Noble. My 
recollection is that he was talking about how he had discovered 
that Daily Kos was offering advertising over a certain length 
of time for $50,000.
    So we are starting to see some opportunities for 
advertising on the Internet and even on blogs that might turn 
out to be fairly expensive. So that is kind of--the focus of 
our proposal is really just on those paid ads, at least at this 
time.
    Ms. Weintraub. Could I add, Mr. Chairman, that, to the 
extent that we are looking at paid ads, it would--even if an ad 
is placed on a blog, the restriction in the proposed regulation 
would only govern the ad. It wouldn't govern the entire blog.
    The Chairman. I ask this question: I know that there are 
people out there that have formed groups, and you think they 
are 527, and you find out they are nonprofit or 501(c)(3) and 
then they go after candidates and have press conferences in the 
states. They bring up--they get one citizen, and they say, this 
is the committee against so-and-so. Then you see them on a blog 
all of a sudden, and they are out there blogging. So do they 
become an individual blogger that shouldn't be regulated?
    But this is someone--you can see the track, and people put 
money into advertisement on her blog. But she is a private 
citizen, so we don't touch her. Yet we know she has done press 
conferences. She has been here. She took money, 527 money.
    So, this is what kind of baffles you. How would you ever 
determine, you know--well, you go after them if you saw that 
they did a press conference for political activity and the 
money came in for an advertisement, but you don't go after them 
if they are just bloggers? I don't know the answer. That is why 
I asked you about them, a blog versus a web site.
    Mr. Thomas. Well, briefly, I would note you struck on one 
of the many complexities in this area.
    The Chairman. I gave you a real live case, too, that I have 
personal knowledge about.
    Mr. Thomas. Many members have lived through the experience 
of dealing with blogging operations that are fired up and 
active and usually going after the member in question, and it 
is a tough one.
    We have exemptions in the law, however, for individual 
volunteer activity. If you really are acting as an individual 
and you are basically doing activity on your noncompensated 
time, we think there are ways that should be used to exempt 
whatever those people do using their own computer and so on. So 
if you set up a blog, a Web site using your home computer, do 
it inexpensively, that is fine.
    What we are trying to focus on are situations where maybe 
someone does, in fact, pay for advertising on a Web site of 
some sort. It might be a blog, it might be some other very 
popular Web site like Yahoo, which has very, very expensive 
advertising space as Internet ad activity goes. So we are 
trying to focus on the most obvious situation where money is 
being spent to influence someone's election.
    Ms. Weintraub. I think that is a really important 
distinction--I am sorry, Mr. Chairman, if I could jump in--that 
we are talking about, is potentially regulating money that pays 
for the ad that would appear on the blog. The fact that we have 
a regulation that might regulate the money that is paying for 
the ad on the blog does not mean that the blogger cannot then 
continue to blog, cannot then hold press conferences or 
exercise his or her rights of free speech in any other area. It 
actually goes more to the person who is buying the ad than to 
the blogger him or herself.
    The Chairman. It still goes to disclosure in a sense. 
Because I am not by any stretch of the imagination saying, to 
be frank with you, when these individuals go into the districts 
and do a press conference: ``I am here to clean up the 
government, et cetera'', you usually find out they have, 
tripped over themselves anyway somewhere along the line. Then 
you look at their web sites and the stuff they stand for and 
the out-of-towners in here. So a lot of it, frankly, is not 
effective politically in anybody's district, either side of the 
aisle.
    But it goes to the question about the money. I am not 
suggesting you stop press conferences or free speech, but the 
reformers will say it still comes down to disclosure. Because 
if soft money is banned in the system, or trying to get soft 
money out of the system, the next thing you know somebody comes 
along and says, ``Hey, I will tell you what, you start this 
blog, but I am going to make sure that the money flows over 
towards that blog or wherever you go. In fact, why don't you go 
on a couple of the online radio shows, and we will go ahead and 
advertise $100,000 worth there.'' Now you start to say, is that 
some type of coordination?
    But that comes to the heart of my question: How do you 
determine that? And I would like to ask you, Chairman Toner, 
how do you determine that? How would the FEC say there was 
coordination and soft money afloat? Does it kick in because 
somebody files a complaint? Or do you have your staff surf web 
sites? I am just really curious to know how you determine that, 
if there has been a violation
    Mr. Thomas. Well, Mr. Chairman, most of the activity we get 
involved with in terms of enforcing the law as it relates to 
Internet activity comes to us through complaints. There is a 
very vigorous community out there on both sides of the 
political spectrum, and they are always looking at Web sites, 
they are always scratching behind it to try to find out if it 
looks like someone is actually subsidizing the Web site that is 
within, say, the control of a candidate or a party committee or 
something like that. So we have gotten several complaints along 
those lines.
    The coordination investigations are always difficult. It is 
very difficult to find someone who will ultimately admit that, 
yes, I had this conversation and, yes, within the technical 
confines of the Commission's coordination regulations we 
crossed the line. But, for the most part, it comes to us 
through the complaint process.
    We don't have a process--or we don't have staff onboard who 
are surveying Web sites and looking for potential problems on 
our own initiative. We don't do that right now.
    Mr. Toner. If I could, Mr. Chairman, I think this raises 
two points.
    First, there has been some discussion about that we are 
focusing on paid advertising, but we also have a proposal that 
would make clear that the press exemption extends to online 
politics; and also the chairman, I think, correctly noted that 
the individual volunteer exemption exists for people.
    But I think my point is that there would be no need for the 
agency to decide or for people on the outside to worry about 
whether the press exemption applies to the Internet if we 
didn't exercise jurisdiction over the Internet in the first 
place.
    Similarly, there would be no need for individuals to have 
to determine whether or not they were in the individual 
volunteer exemption if there was no jurisdiction over the 
Internet in the first place.
    These are examples of the complexity of the law that arise 
if we exercise jurisdiction and regulate in any manner. If we 
don't regulate in the first place, we don't have to get into 
thorny issues of whether somebody is an individual volunteering 
for a campaign and protected. They would be protected like 
everybody else, because we would be saying, in very 
straightforward English, if that is ever possible in these 
regulation books, that we are not exercising jurisdiction in 
the first place; and, therefore, you don't have to hire the 
lawyers----
    The Chairman. That is the key, to regulate or not regulate. 
That is the question. And the court said you have to do 
something, so that is why this is a----
    Mr. Toner. I should note that the Commission has sought en 
banc review by the full D.C. Circuit, and one of the challenges 
in that en banc review is whether or not the plaintiffs in the 
Shays case have legal standing.
    Now I don't know how that is going to play out, but if it 
is found they do not have legal standing to bring suit in the 
first place, then there could be the possibility that the 
entire lower court ruling would be vacated, including the 
obligation on this Internet rulemaking. So it is hazardous to 
predict what might happen in the future, but I did want to note 
that there is ongoing litigation in that area.
    The Chairman. I would have normally moved on to the Ranking 
Member, and she is not here, so I will move on for 5 minutes 
and then the gentlelady from Michigan.
    The gentlelady from California.
    Ms. Lofgren. Thank you, Mr. Chairman. I am happy to be here 
this morning.
    As you know, I represent Silicon Valley in the Congress, so 
I am not the first person you would think of who would say let 
us regulate the Internet. In fact, I think it is a blessing 
that we have managed to keep the heavy hand of regulation off 
the Internet. I recall when I was sitting on the Judiciary 
Committee looking at the Digital Millennium Copyright Act that 
the first draft of that actually prohibited Web surfing, which 
I thought was interesting. So when the government moves in to 
regulate the Internet, we will almost always get it wrong, it 
seems to me. And I am inclined--obviously I want to listen to 
all the witnesses, but I am inclined to believe that we ought 
to just keep hands off. I mean, the whole point of Federal 
campaign finance regulation is because, you know, TV is so 
expensive. I mean, you need to have a level playing field.
    But the ability to enter the Internet, I mean, there is no 
barrier to entering the Internet. And so the rationale for 
regulation and control, that does burden free speech, and maybe 
for good reason when you are talking about buying million-
dollar TV ad buys isn't present in the Internet. It is a great 
leveler of people being able to communicate and have their 
opinions out there, and really it is what is interesting gets 
heard. It is a wonderful endeavor where the most interesting 
person, the most exciting blog actually floats to the top.
    So I am interested in--I don't know whether you have had a 
chance to look at the bill that has been introduced by Senator 
Reid and Congressman Hensarling relative to this. Do you have a 
comment on whether that really accomplishes what I have just 
said I want to accomplish, Commissioner Weintraub, or any of 
you?
    Ms. Weintraub. I think that it would. It certainly would 
lead to a hands off the Internet approach. I have seen those 
proposals in various iterations, sometimes freestanding and 
sometimes folded into larger packages. So obviously the Members 
will decide whether they want to have other things in addition 
to an Internet exemption. But my comments only extend to the 
Internet exemption itself.
    Mr. Toner. And if I could note, I think the Reid bill is 
excellent. It would solve the public communication part of the 
problem that was introduced by the Federal court decision here. 
There may also be--might make some sense to focus on whether a 
similar type of total exemption from the Internet from the 
definition of contribution or expenditure which would make 
ironclad that all activity on line is exempt from regulation, 
not just public communications, but in all forms, and 
regardless of whether coordinated or done independently.
    Mr. Thomas. Congresswoman, I take a slightly different 
approach. While you are here, I will try to bend your ear. I 
think the problem that I have tried to articulate in my 
statement is that this blanket exemption for all Internet 
activity, it is in essence too broad because we are starting to 
see the use of paid Internet advertising increasing. In my 
opening remarks I referred to statistics from one of the on-
line coalition representatives who testified at our hearings, 
and he pointed out that in 2004 he had identified more than $14 
million worth of paid Internet advertising just in 2004 alone 
for campaign purposes. And it is like a lot of things, it is an 
opportunity; it starts out small, but it grows and grows and 
grows. We saw that with the soft money phenomenon.
    There are some other statistics. You are starting to see 
some large outlays by national party committees. One of the 
national party committees, it is in my statement, made payments 
of $260,000 for e-mail acquisition, payments of 200,000 and 
payments of 179,000 for e-mail services, and payments of 
170,000, and 147, 000 for Web advertising. So the numbers are 
starting to grow. And on a committee-by-committee basis, a 
campaign-race-by-campaign-race basis, you see the potential for 
someone who is otherwise prohibited from subsidizing that 
activity all of a sudden maybe being able to subsidize a 
significant amount in a particular candidate's race. So that is 
what we are trying to focus on.
    As we have tried to point out, none of us has any interest 
in regulating what John Q. Citizen does on their home computer. 
We want people to be able to use the facilities at their 
workplace as long as it does not interfere with the normal 
amount of their work. They can work at the office at night on 
the office computer. We have regulations and ways of getting at 
really opening up the ability of individual of bloggers to 
undertake what they do, but we do think this broad exemption 
that is in the amendment that this committee adopted and that 
is in Senator Reid's bill, at least I do, I think it is a 
little bit too broad. It can be better tailored. We are trying 
to do that through our regulations at the Commission.
    Ms. Lofgren. If I may, Mr. Chairman, I know my time has 
expired, but I have a statement I would like to submit for the 
record, and I certainly will listen, but I am not persuaded 
that the Federal Government should regulate the Internet. I 
just am not. At the end of the day, there are many contentious 
issues before the committee, but it may be that we are going to 
agree on this one. And if we took the Reid-Hensarling bill and 
put it on the suspension calendar, we could probably get it 
done this afternoon, and that might be an approach we want to 
take. So I yield back.
    The Chairman. The additional materials are entered into the 
record.
    [The information follows:]

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    The Chairman. Gentlelady from Michigan.
    Mrs. Miller. Thank you, Mr. Chairman. I was a few minutes 
late as well. I do have an opening statement. Without your 
objection, I would like to offer it for the record also.
    [The information follows:]

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    Mrs. Miller. You know, first of all, I think we need to 
stop calling some of these different groups reformers. They are 
really not reformers, they are regulators, I believe. They just 
want to regulate, regulate, regulate. In fact, in another 
committee I sit on, I am the chairperson of the Regulatory 
Affairs Subcommittee on Government Reform, and we are spending 
a lot time looking at onerous governmental burdens through the 
regulatory process and what it is doing to industry, how 
uncompetitive it is making America in the global marketplace, 
and trying to dissect and eliminate some of these onerous 
government relations. What we are talking about here is not 
going to stifle competition, but has every opportunity to 
stifle free speech.
    As we are all marching down the information highway, and my 
staff sometimes refers to me as a technotwit, I try really hard 
to keep up to date. But if you were not really familiar with 
technology, some of this would just seem like gibberish, I 
think, to the average American who is trying to understand how 
what we are talking about actually is going to help them 
understand who is trying to influence their vote and influence 
the election process. And perhaps what you are dealing with as 
a result of the court action goes to why a lot of people raise 
consternation about activist courts legislating from the bench 
rather than the legislative body doing what they were elected 
to do.
    I agreed with your statements, Mr. Toner. I was not in 
Congress when BCRA passed, but it did seem to me, reviewing the 
law, that Congress did make a conscious decision to exempt the 
Internet from the McCain-Feingold Act, and that was the clear 
intent. I agree with your observation on that. And I notice 
that there was actually an article in The Hill last month where 
it was reported that Senator McCain had suggested that 
President Bush reappoint the Chairman to the FEC, and so I 
wonder why would he want to reappoint someone who was 
interested in internet regulation. Have you had an opportunity 
to talk to Senator McCain, and does he agree with your position 
on this subject, Mr. Thomas?
    Mr. Thomas. I have not talked with Senator McCain except, I 
guess, twice in my life, and it has been years since that 
occurred. I assume that Senator McCain is reflecting what we 
are seeing in a comment that was just handed to me today from 
several of those groups who are basically taking the position 
that, I think, they don't want to regulate the vast majority of 
what we are seeing on the Internet. I think they, as I 
suggested this morning, are thinking we do need to preserve the 
core provisions of the statute that would prevent someone from 
just paying for a candidate's Internet services, and that would 
at least get at this phenomenon we are starting to see of paid 
advertising. That is real money that someone can pay to support 
a particular candidate's race, and so where you have got that 
clear pattern of money actually being expended, maybe the base 
contribution limits and prohibitions limits should apply to 
someone who is paying for advertising on the Internet. But I 
think that is probably the position that Senator McCain would 
take, along with the groups that have filed that recent 
comment.
    Mrs. Miller. Well, like all types of regulatory things, 
particularly when it comes to campaign finance, there is never 
any really black and white. I think there is a lot of gray in 
this rainbow.
    I was trying to make some notes when you were speaking 
about 80,000 new blogs--was it a day--are coming, on-line? I 
can't even imagine that you have any estimate of what your 
budget and your staffing level requirements would be if you 
actually had to start to regulate some of these kind of things. 
And, of course, we have very strict regulations under the 
Campaign Finance Act about corporate involvement, et cetera. 
Some of these blogs, I understand, actually incorporate to 
protect exposure. How would you be able to regulate that to be 
certain that these bloggers are not already negatively 
impacting the laws on the books?
    Mr. Toner. Congresswoman, as you know, I don't think we 
should go there across the board. That would be the solution, 
because otherwise we might have to hire some additional staff 
to keep up with this. But 80,000 new blogs are created every 
day in cyberspace. Billions of links exist on the World Wide 
Web; millions of Websites, millions of e-mail sent out ever 
day. For me, that is what makes it fundamentally different than 
other types of communications.
    I think the Chairman is correct in noting in the past cycle 
spending that is related to the Internet, there is no question 
that political committees and others are focusing on that. They 
are developing e-mails, Websites, the ability to do links, 
candidate often set up their own blogs, a wide variety of 
Internet activities. But where is the potential for any of that 
to dominate this medium? Where is the potential for anyone, no 
matter how much money they might want to devote, to be able to 
crowd anyone else out in this medium? That is different from 
television or radio or other types of communications where you 
really can buy a lot of points and prevent other people from 
getting on the air. And so if the Internet is different from 
that, there is no danger of that, given it is doubling every 
5\1/2\ years. Where is the basis for regulation where the 
touchstone of any permissible campaign finance regulation is 
corruption or the appearance of corruption? How can that happen 
in this kind of environment?
    Mrs. Miller. I know my time is up. One more question. Just 
to follow up on that, because it is so true. I had been a 
secretary of state before I did this job and did campaign 
finance in my State of Michigan, and obviously I was always 
looking at Buckley and what it meant. And the impetus of 
Buckley was to negate the impact of big money on the influence 
of the electoral process. I am just wondering, could anybody 
give me an example right now where you would see a specific 
example of something that is happening on the Internet with 
paid political advertisements that you feel is corrupting the 
process?
    Mr. Thomas. Well, we get that question fairly frequently, 
show me some evidence of corruption.
    Mrs. Miller. Show me the money.
    Mr. Thomas. Exactly. It is always--I am not going to go 
there. I am not going to assert any particular thing I have 
seen is corruption. What I would say, and this goes back to the 
type of example I alluded to, even a blog site like Daily Kos 
has one advertising option whereby you can spend as much as 
$50,000 to get on that very popular Website. I suppose there is 
even more expensive advertising on bigger Websites that a lot 
of Americans go to like Yahoo or something like that, Google, 
if that is your opening Website on your computer. So if someone 
wants to pay for advertising to support a candidate on a site 
like that that is very popular and would be seen by a lot of 
folks, it can start costing a lot of money.
    So that is really the focus I am trying to bring to you. 
There are some situations where I guess this advertising is 
starting to get a little bit more expensive. We did get folks 
at the hearing telling us for the most part most Internet 
advertising space is very inexpensive. And so most of it 
probably--if someone is running a site that for some reason 
provides paid advertising, and they are an individual, if it 
supports a particular candidate and basically someone is 
subsidizing that, that person has a contribution limit as an 
individual of up to $2,100 per election, so a little $50 ad on 
someone's Web site is not going to be a problem. But I grant 
you there are situations where you can start to affect more and 
more folks because there is probably more and more opportunity 
for paid Internet advertising. As the vice-chairman pointed 
out, lots more Websites are popping up.
    So it does have the potential, even if we focus on this 
advertising aspect, to be fairly broadly--broad in impact. I 
think that Commissioner Weintraub's idea of maybe trying to 
allow some flexibility for bloggers to incorporate without 
triggering the standard corporate prohibition rules, I think we 
can try to find a way to work there. That would be very 
helpful.
    Ms. Weintraub. Congresswoman, if I might, you had mentioned 
how many staff we would need to try and deal with this issue. 
About half the people in the room right now are staff of the 
agency who are here trying to read the tea leaves on what kind 
of regulation they might be writing or maybe not.
    Mrs. Miller. So this is a full employment bill for them, 
right?
    Ms. Weintraub. We have plenty of work to do, Congresswoman, 
and I would like to differ with something the Chairman said 
earlier. I think that you can see the outlines of the 
regulatory approach that we are contemplating now. Again, I 
didn't come here to lobby one way or the other, but if you are 
going to pass a law and obviate this rulemaking, on behalf of 
the staff that would still have to put in a lot of hours to 
work out the fine points, I would appreciate it if you would do 
that sooner rather than later, not after we write the 
regulation, but before we put that work in, because believe me, 
we can find other jobs for them to do. Thank you.
    The Chairman. I have just one more question. If you want to 
ask another question before we go to panel two, whatever either 
Member would like to do. Let me ask you just a quick answer for 
this: How effective do you think the Internet actually is in 
its believability when it comes to bloggers and political 
activity? The internet might not be particularly credible 
because you can put anything you want on there. Something 
becomes very salacious, and then the other supporters come out 
and attack another candidate in the case or beat each other 
with baseball bats, and the rest is history.
    In a way, the internet is not as effective a tool as the 
good old-fashioned way of people talking to each other in 
communities and neighborhoods on where they stand on the 
candidate. I also think there are times where the internet 
tries to get something going politically on groups, or advocacy 
groups, or candidates, and hope to get it into the mainstream 
media, where it would--I can't believe I am saying this--have 
some validity in the mainstream media. But it would have more 
validity if it is printed in a major newspaper, radio or TV 
rather than if you read it on the blog, because anybody can sit 
there and get mad and blog back.
    Having said that, how effective are the blogs politically? 
If people are advertising and spending all this money, should 
you really regulate it? It is out there, it is free speech, but 
not really an effective political tool as much as going door to 
door and things like that? Any comments in that direction? This 
is probably outside the box, what I am asking.
    Ms. Weintraub. Well, Mr. Chairman, I think that the second 
panel would probably have a lot to say on that subject.
    The Chairman. I am not saying they are not effective, but 
if you are looking for the political activity in the blog, and 
it is going around BCRA and soft money, maybe it is not in the 
sense--maybe the advertisement angle is too much to look at to 
regulate. That is what I was trying to get at.
    Ms. Weintraub. I think that the information that is out 
there on the Internet is about as reliable as what you get 
walking around in your neighborhood and talking to your 
neighbors. Some of your neighbors are more reliable than 
others; some are biased, and others are not. You can make that 
assessment. I think what a lot of people find to be one of the 
great virtue of the Internet, if somebody says something not 
reliable, inevitably there is somebody else who is going to be 
banging away at their keyboard a minute later pointing out the 
fallacies.
    The Chairman. So you think they are politically effective, 
the bloggers?
    Ms. Weintraub. I think the last election showed an awful 
lot of effective political activity took place.
    The Chairman. So why don't you want to regulate them?
    Ms. Weintraub. It is not a question of whether I want to 
regulate it or not.
    The Chairman. If you say they are politically effective, 
and it is an arm of politics, and there is money over there.
    Ms. Weintraub. We will regulate it. We are under a court 
order to regulate it.
    The Chairman. I am not trying to ask a trick question. If 
they are politically effective entities, and soft money is 
going to them so the reformers would say, ``Yes, it is 
effective'', or ``We write them off, they are really not 
effective'', people are still talking to each other in 
neighborhoods, so why should we regulate them at all? I have 
supported along the lines of not regulating, but I am just 
saying this argument becomes so confusing, and they either are 
politically effective and are utilizing soft money to bypass 
the system, or they aren't, and if they were, how would you 
even regulate them?
    Mr. Thomas. I would note, Mr. Chairman, you are about to 
hear from a gentleman, Mr. Mike Krempasky, who runs 
RedState.org. If you don't think that is an effective Website, 
you are not really sort of following the political process. It 
is a very effective political Website, and I would note from 
the outset he spoke with advisors, and they basically decided 
they were going to set themselves up as a political committee, 
operating as a political committee.
    There is a broad array of Websites, and some are obviously 
more effective than others. I think the committee would be very 
well served to do some really good research to see if you can 
get some sense as to which of these Websites were utilized 
effectively during the campaign and how, get some flavor for 
whether this phenomenon of Internet advertising really is 
something where it was effective in a particular race. You have 
got a lot of colleagues, and maybe you could inquire from your 
colleagues, ``Tell me about your race; can you remember any 
advertising that was on Internet Websites that people seemed to 
have picked up on and followed and that may have gotten tons of 
chatter?'' I think that is a very valuable part of this 
committee's function.
    The Chairman. I am not saying by any stretch of the 
imagination that they are not effective. I just threw that out 
there, not being facetious, but throwing it out there. Some 
people say, well, you dismiss it, but you might want to have 
some regulation because they are effective, and soft money is 
going there. And I am saying it is a very confusing issue, but 
it still comes down to free speech and the internet, which is a 
unique, different creature than a newspaper or a radio or a 
television. Even here in the House we have looked at the 
transmission of an e-mail, as long as it is not for political 
purposes, as a different thing that we look at to regulate 
versus if the Member puts out the newsletter. So the Internet 
is a different, type of creature.
    Mr. Toner. If I could, Mr. Chairman. I think a strong 
argument could be made that Web blogs and the Internet in 
general is self-regulating. If there are over 14 million blogs 
in this country, the raw number of them prevents any one of 
them, no matter how widely read, to dominate discourse. And 
also, Internet communications often require proactive steps by 
the viewer to go get that information, unlike television or 
radio, which can be very passive. The raw breadth of the 
Internet, the accessibility of it, I think an argument can be 
made, really prevents the ability for anyone to have a 
corrupting influence no matter how much money they may be 
spending on it.
    The Chairman. Do either of the Members have additional 
questions?
    Thank you for enlightening us today and confusing us today, 
but actually being here to have a good discussion on the issue. 
I want to thank all three of the Commissioners.
    The Chairman. We will now move on to the second panel. 
After the hearing I am sure the second panel will blog us to 
death to show how prominent and powerful they actually are. Our 
second panel, we are fortunate to have with us today two 
operators of two very popular political web logs or blogs. 
These witnesses will explain to the committee their perspective 
on Internet regulation, which will shed light on how the blogs 
operate.
    First we have Michael Krempasky, who runs a conservative 
blog, RedState.org. Then we will hear from Duncan Black, who 
runs the liberal blog Eschaton. We look forward to their 
remarks.
    We also, I would note, invited Eli Parser of moveon.org. 
and Marcos Zuniga of dailykos.com. They weren't able to come 
due to some scheduling conflicts.
    We are glad to have both of you here to hear your point of 
view, and we will begin again, I think, with Mr. Black. Thank 
you.

  STATEMENTS OF DUNCAN BLACK, FOUNDER, ESCHATON WEBSITE; AND 
   MICHAEL KREMPASKY, DIRECTOR, REDSTATE.ORG, FALLS CHURCH, 
                            VIRGINIA

                   STATEMENT OF DUNCAN BLACK

    Mr. Black. Chairman Ney, members of the committee, thanks 
very much, and thanks for the introduction. I will stick 
roughly to my prepared remarks, although I will deviate 
somewhat in response to some of the comments of the previous 
panel.
    I just stated my name is Duncan Black. I write for the 
Website Eschaton, a blog. Everything on the Internet these days 
tends to be called ``a blog,'' but whether or not that is valid 
or not I don't know, but I do actually have a blog, and I 
started it in April of 2002. On the Website, I cover politics, 
current events, economics, and cultural issues.
    During the 2004 campaign the site averaged between 1- to 3 
million viewings per month, and in addition to writing about 
politics, I also engage in fundraising drives for a number of 
Federal candidates and the DNC and other organizations, 
candidates including Joe Hoeffel, John Kerry, Ginny Schrader, 
and Richard Morrison and others. I run advertising and accepted 
paid advertising on behalf of Federal campaigns.
    My goal is really here more to provide helpful information 
as I can regarding the narrow question of whether greater 
scrutiny and regulation of Internet political speech is really 
necessary in order to meet the intent or spirit, what I 
consider to be the intent and spirit, of campaign finance law. 
I am no expert in this area, but my understanding of the basic 
motivation and statutory language of the legislation and the 
general purpose behind all such campaign finance language and 
laws is to reduce the impact of concentrations of financial 
power on Federal elections.
    It is my opinion, either through the regulatory process of 
the FEC, if possible, given the current court decision, or 
through slight modification of actual legislation, the 
government should take steps to not implement and force 
regulations which impact the ability of small actors to engage 
in political speech on the Internet, an activity which neither 
requires nor necessarily benefits from being backed by 
significant financial resources.
    The Internet generally and blog specifically is a medium 
which allows anyone the full powers of the press and to 
potentially command a large audience at a minimum cost. Unlike 
broadcast, cable or newspaper distribution where there are 
significant barriers to entry, both financial and otherwise, 
there are almost no barriers to entry on the Internet. Anyone 
can reach a large audience for a minimal cost. I find it hard 
to believe that the intent behind campaign finance legislation 
was to sort of leave large media corporations essentially 
untouched through the media exemption by campaign finance law 
while failing to grant similar latitude or exemption to small 
Web-based publishers.
    If the current statutory language doesn't make it clear, 
and the court decree requires Internet communications be 
regulated by legislation which I believe is poorly suited for 
doing so on the Internet, which is inconsistent with the 
broader intent of campaign finance legislation, then the 
legislation should really be changed. Whether by clearly 
extending the current media exemption or through other means, 
those who use the Internet for the purpose of disseminating 
news, commentary and editorial should be as free to do so as 
are Clear Channel, Disney, News Corp., Time Warner and others.
    So I began my site, as I said, in the spring of 2002. Both 
then and now I use almost entirely free web services. My direct 
operating costs of my website, really being generous here, are 
about $150 a month, if that, and that includes paying for a 
standard Internet connection and maintaining a working 
computer. I have never spent any money to advertise my sites or 
on any other sort of public relations activity or any promotion 
of my site whatsoever. While the meaning of Internet statistics 
is always somewhat unclear, I get about 125,000 visits per day 
on an average day, and that probably means I reach maybe 40,000 
unique sets of eyeballs for a day.
    I began my site simply as a hobby. I had no intention of 
making money, but eventually, through large enough traffic, I 
could make money through advertising. I haven't yet 
incorporated, but other bloggers have done so primarily for the 
purpose of limiting liability.
    As with many other blogs, my site provides links and 
excerpts of current news article, commentary and other events 
and other editorial comments. I have endorsed candidates for 
Federal elections, as most newspapers do. I encourage readers 
to donate money to candidates I recommend, something which you 
see all throughout the media. Just the other day Sean Hannity 
was telling all of his listeners to donate to a candidate for 
Federal election and pointing to them on his website. No 
different than what I have done. The primary differences 
between me and Sean Hannity or major newspapers, or partisan 
magazines, talk radio, cable new networks, broadcast news, et 
cetera, is what I do doesn't require any money. That is the 
real thing.
    The actual financial expenditures I have to make, as I 
said, $150 a month, a generous estimate. Now, it is true you 
can spend money on a site, and other bloggers do. You can add 
some bells and whistles and retain more control over some 
aspects of your site by spending money, but it really isn't 
necessary to spend money to have successful and influential 
sites. It is unclear what the advantage often is of spending 
money.
    So I think those who want more Internet speech to sort of 
fall under the regulatory framework believe that, at some 
point, large sums of money spent on the Internet could have a 
corrupting process. Now, I share the concerns about the future 
possibility. I certainly wouldn't say that this is not a 
concern at all, but I don't see that such abuses have yet to 
take place. I don't yet see a mechanism by which money, just 
simply throwing vast sums of money at the Internet, is really 
going to have sort of a disproportionate effect on the 
electoral process.
    You were talking about the effectiveness of Internet sites 
and whether they are effective. I think the real key here is 
there isn't a very strong connection now between the 
effectiveness of a site and how much money is spent on it. On 
site, you can spend a lot money on the site and not be 
effective at all; you can spend very little money as I do, and 
I am occasionally effective. Hopefully I am. But the point is 
there is a disconnect between the effectiveness and money.
    I would also submit that to the extent that we are 
concerned that as technology evolves and individuals or groups, 
organizations, spend large amounts of money on, say, Internet 
video advertising and these kinds of things, I think the real 
power of those ads won't be when they are on the Internet; it 
is when cable news, or the nightly news decides they are 
interesting ads and rebroadcasts the ads for free over free 
media to the world as just part of their political 
conversation. It is sort of the amplification effect of other 
media that is going to make the difference, not so much the 
money spent on the Internet itself. How you deal with that, I 
don't really know.
    I do share the expressed concerns by Senator Feingold and 
the Chairman of the Commission that the overly broad language 
in the Reid bill potentially opens up loopholes on coordinated 
activity. I think the example of being concerned that if you 
essentially allow somebody not linked to the campaign to 
essentially pay for the entire Internet operations of a 
political campaign, that that is something to be perhaps 
concerned about.
    Whether money spent on the Internet is something we are 
concerned about is corrupting the process, certainly any 
campaign now has to spend nontrivial amounts of money to have 
an Internet operation. That is just part of having a modern 
campaign. If you let somebody just pay a million dollars to 
cover those expenses, we could potentially have either 
corruption or the appearance of corruption.
    So I understand those kinds of concerns, and I certainly 
think those concerns can be addressed largely if a broad media 
exemption is passed by the FEC. I think what is critical, both 
for the poor staffers for the FEC as well as the rest of us, is 
that we get some clarity on these issues sooner rather than 
later, because we are heading into the 2006 election season 
just about now, and it is sort of vital people like me or any 
ordinary citizens participating in political discourse on the 
Internet don't suddenly find themselves experiencing 
investigations as a result of complaints filed through the FEC 
or some other mechanism.
    I thank you for your time, and I look forward to answering 
your questions.
    [The statement of Mr. Black follows:]

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    The Chairman. Mr. Krempasky.

                 STATEMENT OF MICHAEL KREMPASKY

    Mr. Krempasky. Mr. Chairman, members of the committee, I 
want to thank you for your invitation to be here this morning. 
Not long ago if someone would have asked me to come to 
Congress, I would have expected it would be to apologize for 
some intemperate remark I wrote on a Website. Now that 
Commissioner Weintraub informs me that there is a roomful of 
FEC lawyers behind me, I am just hoping to get out alive at 
this point.
    I want to talk to you as someone who is quite potentially 
looking at the business end of the regulations that you are 
considering, the regulations that the Commission is 
formulating, and I want to start with a statement that I hope 
that we can agree on, regardless of our opinions or views on 
campaign finance generally, and that is that technology, the 
Internet, the ability to communicate across the Internet has 
done more to democratize our politics than any law could hope 
to do. It has put more opportunity in the hands of more 
individuals than we have seen any contribution limits or bans 
on communication. It has given anybody around the country, the 
law professor in Tennessee, the homemaker in Ohio, the college 
student in Arizona, the ability to participate at an 
influential level in our politics whether they are local 
campaigns or national campaigns.
    One thing that is crucially important to remember about 
this medium is that despite what figures you are going to hear 
about how much money is spent on line or how many people 
participate on line, it is a medium in which passion and 
creativity really do trump brute force and muscle and funding. 
And to your question, Mr. Chairman, earlier about whether or 
not they are effective, I think they are, but that doesn't mean 
they ought to be a target of regulation. Effective free speech 
is no more dangerous to our politics than ineffective free 
speech.
    Now, in our rush to close loopholes, or perceived 
loopholes, I think it is important to remember that we are 
talking about fixing something that hasn't really been 
demonstrated to be broken yet. We did not see massive amounts 
of soft money circumventing the system in 2004; we didn't see 
rampant spending across the Internet distorting or corrupting 
our politics. We are really talking about fixing a problem that 
is either not there or certainly that we don't understand yet. 
And unlike parties and candidates and campaigns, whether at the 
national or local level, bloggers are not sophisticated legal 
actors. They do not have general counsel, don't have budgets to 
pay to deal with audits and reporting. They really are the 
small speakers that we ought to protect at almost all cost.
    I want to make sure that we understand that when we hear 
about potential loopholes or we hear the specter of these 
things, that in the rush to close them, it is the small speaker 
that is going to be trampled. They are not going to navigate 
Federal election law, they are not going to read FEC advisory 
opinions, they are just going to be quiet. If that is the end 
result of either a piece of legislation that is passed or not 
passed, or a rule from the FEC that is either passed or not 
passed, that would be a real terrible thing to happen.
    Chairman Thomas, in fact, urged you to wait and let the FEC 
sort through these issues. I think in his written testimony he 
refers to sort of bringing their expertise to bear on this 
question. And there is no doubt that the Federal Election 
Commission has experts in law and politics and regulations. But 
I think that when it comes to the issue of expertise and 
technology, I think that may be overstating it a bit. I have 
brought up several times that one of the Commissioners opened 
the first hearing on this issue by telling the entire room 
present that no one in the room knew less about the Internet 
than he did. To his credit, he has tried to learn a little bit 
since then, but I still think that the issues of speech and 
freedom that we are talking about are really important, and we 
have to understand that it is not just about a blog or about an 
e-mail list or something that we are talking about today, it is 
what is the next form of communication, what is the next 
opportunity the people have to participate, and how can we make 
sure that we don't just chill speech, but that we don't 
actually inhibit the development of new technology.
    Now, as Duncan mentioned, I think that one of the easiest 
ways to solve this question is to simply acknowledge in law 
what we already know, and that is that new and alternative 
media, the most commonly talked about one now of which is 
bloggers, are, in fact, media. Rush Limbaugh wakes up every day 
trying to change the country, influence elections, and the law 
grants him an exemption for everything he does through his 
outlet. So what possible good is it to protect Rush Limbaugh 
and Paul Begala on CNN while they are spending corporate money 
to affect our politics while potentially regulating people like 
Duncan and I? That to me doesn't seem to make any sense at all.
    Finally, I think I would just like to point out that the 
legislation before this committee which mirrors the Reid and 
Hensarling bills doesn't solve all the problems. It does leave 
gaps in the campaign laws before BCRA that still have to deal 
with bloggers and people that communicate on the Internet, but 
what it would do is put Congress on the record saying that this 
ought not to be regulated, and we are going to figure out how 
to make sure that is the case, that there still remains some 
place, some opportunity for people to participate as freely as 
they want, and that we are going to support and protect that.
    So I thank the committee for its time, and I look forward 
to answering any questions you might have.
    [The statement of Mr. Krempasky follows:]

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    The Chairman. I think the point you both made was the point 
I was making at the end: Blogs are effective. Some people say 
they aren't, but they are effective. Of course, the blog is 
only as effective as its credibility, how it conducts itself, 
how it outreaches; but I think you both make a good point that 
effectiveness does not necessarily equate to money. You can 
spend a million bucks a year on the best bells and whistles on 
a blog, or spend 150 bucks a month, and it can be just as 
effective. So that is kind of a leveling of the issue, and 
should be able to support candidates and raise money and all 
that.
    Well, we will have some reformers today, but I assume if 
candidates are directly involved and out there soliciting soft 
money out of companies and unions and trying to get that in the 
system, that might be a whole different world. But the bloggers 
on their own are just generally independent and will have 
candidates, like the two of you, that you will support. That is 
the point I was trying to make. I am not sure just because the 
blog is successful, which they are, a lot of them, equates that 
you have to take it and regulate it.
    I just have one question to both of you. Do you think the 
blogging community--not both of you, but just the blogging 
community in general in the United States are worried that if 
regulation comes out that they could run afoul? Would they go 
towards hiring the lawyers they need, or would it stifle 
communication? Are bloggers around the United States concerned 
about regulation, or do they know it is going on?
    Mr. Krempasky. The fact that Duncan and I have been working 
together on this issue sort of speaks to sort of dogs and cats 
living together. I know that when the first--when this first 
hit the news back in March, a group of us, conservatives, 
liberals, libertarians, put together an on-line coalition of 
people that didn't agree on anything except this. We presented 
an open letter to the Chairman of the Commission, and within 
about 36 hours we had about 38,000 bloggers sign on to the 
principles of that letter, asking for more protection as media, 
opposing more intrusive regulations, and warning about really 
two things; one, that they would chill speech, because bloggers 
don't have access to counsel, they don't have folks like the 
talented people here that come and testify on behalf of either 
groups or candidates. But just as dangerous for those that 
support campaign finance reform or regulation, with the 17 or 
14 million blogs that Commissioner Toner pointed out, that is a 
lot of potential complaints that can be flung at each other. If 
you like the idea of getting big money out of politics, the 
last thing you want to do is have the people behind me spend 
all their time with the 3,000 complaints they could get in a 
morning about this blogger or that blogger filed by other 
bloggers. So absolutely they are concerned.
    Mr. Black. They are definitely concerned. I agree with just 
about everything he said.
    I just want to add to stress while I imagine certain 
bloggers might hire counsel and have access to lawyers, and the 
community would probably get to work lobbying Congress to the 
extent they could, and we would see how effective we are, but 
it certainly would have an incredibly chilling effect and in 
part because of what Michael said, in part because it is a very 
partisan atmosphere, and one way to attack would be to attack 
your opponents through the FEC through the complaint process. 
The instant any of us, or most of us, who--for most people it 
is just a hobby, just something to do on the side. They get 
that registered letter or however the complaint arrives, that 
would have a serious chilling effect, and a lot of people who 
were participating the process would decide it was no longer 
worthwhile to do so.
    The Chairman. Why don't we move on to the other Members.
    I think blogs are effective. I think the greatest thing 
about the blogs, you do not have to have a lot of resources 
behind yourself to start it. I think that gives the average 
citizen from any walk of life the ability to get into the 
political process.
    The gentlelady from California.
    Ms. Lofgren. Just a couple of questions. I think I have 
already made my inclinations known to the prior panel. I never 
am very interested in regulating the Internet because of where 
I am from, I guess, but I do want you to comment on the 
suggestion made by the Chairman of the committee. I am 
summarizing, but my sense is that he was thinking that a 
distinction could be made between what you do and say, for 
example, Yahoo. I mean, Yahoo is publicly traded. Their CEO 
came from Walt Disney Corporation, they are different than you 
guys, and that that somehow should be a subject of regulation. 
I am not sure how you make the distinction, but I am wondering 
if you have thoughts on that proposition.
    Mr. Black. First of all, it is not clear--I mean, Yahoo is 
a publicly traded company, but it is also a media company. It 
runs newspaper articles from newspapers all over the world, 
including editorials from all over the world, people operating 
other media; publishes columns by opinionated people who are 
trying to affect elections in this country in one way or 
another. So Yahoo is a media company, and they are free to do 
all this without having any regulatory oversight by the FEC. 
There are restrictions on other types of corporate activity 
that they engage in outside the context of their media 
operation, but nonetheless the basic activity of running news 
and commentary on their portal site, they are perfectly free to 
do that. In that sense I am not sure what the important 
distinction would be between what I do either as an 
unincorporated blogger, which I am, or if I were to incorporate 
as a media company, and Yahoo the media company.
    Mr. Krempasky. I think Duncan's point about Yahoo is a good 
one. I think what we are really talking about is the specter 
that was raised at the hearings this summer about what if 
Halliburton had a blog; wouldn't that be awful? Professionally 
I work with a lot of corporations to try to teach them how to 
communicate either through or with blogs, and I can tell you 
that all of the things that make blogs successful, speed, 
responsiveness, personality, tone, credibility, even a bit of 
irreverence, none of those exist very well in a corporate 
environment.
    So the prospects of a successfully funded blog in the 
presence of things like general counsel--and I have to say that 
I can tell you that I had a conversation with a corporate legal 
counsel this week that had not only convinced his client but 
the rest of the company that if they were to run a blog, they 
would not be allowed to link to a news article without 
violating some copyright laws. And so the risk of the corporate 
environment when it comes to succeeding in this medium, they 
are really not as compatible as people think they are.
    Ms. Lofgren. Let me ask another question, because I really 
think opening the door to regulating the Internet is a mistake; 
however, there are regulations that are going to apply whether 
or not you are on the Internet. I am wondering, I don't know 
whether either one of you has filed as a 527. Have you? The 527 
regulation in terms of tax-exempt status is going to continue 
to rule your activities, whether it is on the Internet or off 
the Internet, in terms of just whether you are eligible for the 
exemption. You wouldn't suggest that the IRS rules be changed 
in any way, would you?
    Mr. Krempasky. Let me say that RedState filed all of these 
legal forms and with all these specific agencies because we 
expected this issue to come up this year. And we saw everything 
that was going on in the campaign last year and had to go out 
to raise the money to pay a lawyer to file the paperwork and 
file reports every quarter disclosing every penny that comes in 
and goes out. And we did that hopefully so others would not 
have to go through that burden.
    I don't have any comment specifically on the IRS or the 
rules that govern political committees except to point out it 
is not an easy thing for small speakers, individuals, or even 
small groups to navigate that process at all.
    Ms. Lofgren. I know my time is almost up, but it seems to 
me that while we don't want to regulate speech, people who are 
getting a tax exemption are going to have to still follow the 
tax exemption rules of the IRS, and that we should make that 
clear.
    I thank the Chairman and yield back.
    The Chairman. Mr. Ehlers.
    Mr. Ehlers. Thank you, Mr. Chairman. Thank you for having 
this hearing. I think it is a very important topic. I have read 
a few blogs here and there, but I wish I had more time to read 
them. They are very interesting, very entertaining, and it is a 
pleasure to have you here to present your point of view. You 
look remarkably normal for bloggers.
    Mr. Krempasky. Sir, you look remarkably normal for a 
Congressman.
    Mr. Ehlers. I am a fellow nerd, and I managed to cover it 
pretty well, but my plastic pocket protector always gives me 
away.
    As you know, most of the laws we write are designed to 
regulate the bad guys, not the good guys, and from all 
appearances you folks are good guys, and I applaud what you are 
doing. I think it is very good.
    The concern that I think the FEC and that some Congressmen 
have is what about the bad guys who will misuse the Internet, 
misuse blogging, and in ways that certainly at least violate 
the spirit of the campaign finance reform law. Can you imagine 
ways in which some of your less ethical colleagues could 
basically subvert the law or violate the intent of the law by 
misusing their freedom on the Internet? I would just be 
interested in any responses you might have to that.
    Mr. Krempasky. I think regardless of how they might do 
that, the unfortunate companion to that is that it is 
absolutely unenforceable. If they chose----
    Mr. Ehlers. We will get to that later. I want you to think 
creatively about----
    Mr. Krempasky. Certainly people could use servers and 
Websites in other countries. Chairman Thomas mentioned foreign 
nationals and governments spending money. I am not sure how you 
get at that, if it is actually a Canadian or English company 
and Websites pouring content into America that Americans are 
reading, whether or not that violates the law or not. It 
certainly doesn't seem to be a question we can start to answer. 
I suppose there are ways that people can spend a lot of money 
on the Internet that maybe they would not otherwise be able to 
spend if it were in television or radio or things like that.
    But I think one thing that Duncan made pretty clear is that 
there is really not a corollary between spending and 
effectiveness. Commissioner Toner pointed out earlier that you 
cannot really crowd anybody else out. So even though you might 
be able to spend amounts of money, it is not like you can have 
the same impact in this medium, which I think is a completely 
different animal.
    Mr. Black. I think people can behave unethically on the 
Internet as they can in all walks of life, and a lot of what we 
think of as ethical issues, such as not disclosing conflicts of 
interest, not disclosing financial connections to individuals 
or groups, or anything else that you may be endorsing or 
supporting one way or the other, all those are potential 
unethical behavior that can be engaged in on the Internet and 
are engaged in every single day throughout the rest of our 
media where people are going on TV and certainly not always 
disclosing what groups they work for or what groups they 
represent. Maybe they are not even being unethical, it is just 
in the interest of time, they are not going to post their CV on 
the television screen every time they have something to say.
    I think those issues of ethics exist throughout the media 
and potentially would be no different in Internet activity. I 
am not sure that means, therefore, we have to regulate Internet 
activity exactly.
    Mr. Ehlers. Let me give an example that just occurs to me. 
In the last election we saw some individuals who spent millions 
and millions of dollars of their personal money on the 
campaign, all of which was duly reported some ways through the 
IRS, which is not as effective as FEC or as timely, but 
nevertheless they did that, and it was reported, and everyone 
knew what they spent and that they were trying to influence it.
    I suppose someone with huge amounts of money would hire 
1,000 bloggers and say, okay, you go to it. I want you to talk 
about this, and I want you to have this political point of 
view, and in order to boost your readership, I want you to 
offer prizes to your readers if they read your message all the 
way through and spot certain key points, can answer a question 
at the end; they send it in, and if they are right, they get 
$200 or whatever. This would be a very effective way of 
spreading false information and clearly violating the intent of 
the campaign laws, because someone would be spending a lot of 
money to spread a message in a very effective way. Would you 
regard that as inappropriate? Clearly they are not in your 
category where you are trying to scrape along and write 
entertaining, interesting, concise letters, but basically being 
bribed to read propaganda.
    Mr. Black. I think to some extent you described an 
extension of the modern public relations industry. Yes, you can 
find ways.
    Mr. Ehlers. But they have to report.
    Mr. Black. Certainly, but as long as this stops short of 
endorsing Federal candidates, then they are probably not going 
to run afoul of campaign finance laws. The public relations 
industry is very good at influencing public opinion on a 
variety of issues up to and including essentially writing op-
eds and signing other people's name to them with their 
permission, for payment. These kinds of things go on all the 
time. It is only once you get to influencing Federal elections 
directly that you run into issues with the campaign finance 
laws.
    Mr. Ehlers. I will yield back in a minute, Mr. Chairman. I 
just want to apologize for being late; I had a couple of other 
meetings and shortly have to go to the floor to speak on a bill 
that is up. This is a topic I am very interested in, and thank 
you very much for being here. The short time I have been here, 
I have learned a great deal. Thank you.
    The Chairman. Thank you.
    Gentlelady from Michigan.
    Mrs. Miller. Thank you, Mr. Chairman.
    I think it has been interesting listening to you both using 
similar examples about how, as we sort of move towards the 
possibility of regulating the Internet, which I think is 
regulating free speech, and thus very dangerous, yet the media 
has a complete and free blanket of protection under free 
speech. The media is protected, and yet oftentimes--I think 
you, Mr. Black, used an example of the media using as part of 
their newscast, something they saw on a blog or on the 
Internet. So the very impetus of that particular newscast, 
which is freedom of the media, yet we are moving to actually 
regulate that part of it.
    And it is a very common element in campaigns. You showcase 
an advertisement that you are about to play, and you have a 
press conference, you have all the media come in, you show them 
the ad, and you are hopeful the media will then broadcast your 
ad for free. Probably the best example of that in the last 
Presidential was the swift boats, which was a very small buy 
and ended up with everybody just broadcasting and talking 
forever about this particular ad, yet they didn't have to 
really disclose how much was spent all over the media on that.
    I think most people would agree that many media outlets do 
have a bias toward an ideology, whether that is conservative or 
liberal or what have you. So I just make that observation as we 
are looking at this question, because it is almost 
counterintuitive, in my mind, to be thinking about regulating 
the internet--perhaps because it is unconstitutional in my mind 
as well. There certainly is a very slippery slope about 
regulating the internet and free speech.
    I would just ask for your observation. I am not sure if 
either of you have any thoughts on this. Why is the thinking 
that you have to regulate it because of dollars spent? You were 
commenting about how inexpensive it is to create these blogs. 
How could you even place a value on an endorsement that is on a 
blog or a candidate's picture that is on a blog or those kinds 
of things, an endorsement, et cetera? Could you comment on 
that? How could the FEC even determine a dollar value and 
decide whether or not they were going to regulate it?
    Mr. Krempasky. I think I would almost leave it to someone 
associated with the FEC to talk about how they come to 
conclusions and have formulas and such. I think, though, it 
does raise really one interesting question, and that is if the 
Federal Election Commission were to come up with a threshold or 
some line over which if you spent above that, you are now 
considered an active participant in the target of resolution. 
On the Internet there is a dynamic that does not exist off 
line, and that is you can actually create content at home as a 
volunteer that you find interesting. Maybe you edit some videos 
yourself and set them to music or do something interesting or 
funny, and if a site like Duncan's actually notices it and 
drives people to watch it, you can actually get a bill for the 
resources that your site has spent to serve that video to 
people that simply come along and want to see it that not only 
may cross that threshold considerably, the bill may come in 
after the election, and you have no control over it whatsoever. 
You simply put up a little video, 30,000 people come and watch 
it, and you get a bandwidth bill from your hosting company for 
$3,000, which is higher than all these contribution limits.
    So there are costs out there that even if the Commission 
says once you spend past this, there are costs you simply 
cannot control at all.
    Mr. Black. I mean, just to add, I think if we start placing 
value on a link or an endorsement on a hot traffic site, once 
we start thinking about anything on the Internet in terms of 
in-kind contributions, you basically shut down political speech 
on the Internet in its entirety. It would be over.
    I do not see how in practice it could be done. Even if it 
could be done, it would just have an extreme chilling effect. 
No one would bother because it would be impossible to know when 
you cross some threshold of traffic or directed traffic or 
receive traffic. It would just be absolutely impossible.
    Mrs. Miller. Thank you, Mr. Chairman.
    The Chairman. I surely appreciate both of you coming here 
today. I appreciate what you do and the effectiveness of the 
blogs in this issue. We talk about this issue and Mr. Elhers 
and I were just talking, and all of a sudden you go in circles 
because it starts with regulation somewhere in the campaign 
law. And all of a sudden, it goes back and you know to the 
Internet. It is just like an endless discussion. I think also 
technologically it would be so difficult--and you made a good 
example. It would be so difficult to find out who--you know, 
how many people you are talking to. Does that count as in kind? 
It is mind-boggling to think we could go in that direction to 
try to regulate that.
    And with that I have no more questions. Mr. Ehlers, do you 
have any?
    Mr. Ehlers. I would like to know how to get on your list.
    The Chairman. And thanks again and please blog us nicely 
tonight if you can.
    Mr. Black. Certainly.
    Mr. Krempasky. Yes.
    The Chairman. On our last panel, we are fortunate to have 
with us three highly qualified election law experts who explain 
what they believe would be the implications of regulating or 
not regulating the Internet through campaign finance laws.
    First we will hear from Professor Bradley Smith, former 
Chairman of the FEC, who now teaches election law at Capital 
University in Ohio.
    Then we will hear from Karl Sandstrom, of counsel for 
Perkins Coie, and also former member of the FEC.
    And our final witness of the day will be Lawrence Noble, 
who serves as Executive Director of the Center for Responsive 
Politics. Mr. Noble previously served as General Counsel at the 
FEC.
    I want to thank all three of you for being here, and we 
will start with Mr. Bradley Smith.

   STATEMENTS OF BRADLEY A. SMITH, PROFESSOR OF LAW, CAPITAL 
 UNIVERSITY LAW SCHOOL, COLUMBUS, OHIO, FORMER CHAIRMAN, FEC; 
KARL J. SANDSTROM, COUNSEL, PERKINS COIE, FORMER MEMBER OF FEC; 
  AND LAWRENCE NOBLE, EXECUTIVE DIRECTOR AND GENERAL COUNSEL, 
 CENTER FOR RESPONSIVE POLITICS, FORMER GENERAL COUNSEL OF FEC

                 STATEMENT OF BRADLEY A. SMITH

    Mr. Smith. Thank you, Mr. Chairman. I would like to thank 
the members who have joined us today for part or all of the 
hearing. It is a pleasure to be here and be back here in the 
capacity in which I previously testified as a private citizen 
exactly 1 month today.
    I want to begin by talking about the scope of the issue, I 
think which is not fully understood, the potential threat, and 
then a little bit about the press exemption. First let's talk a 
little bit about the scope of the issue.
    What needs to be understood is that if you enact Pence-
Wynn, if Congress were to pass Pence-Wynn, essentially you 
would be passing the exemption that has been on the books now 
and remains on the books even in light of the court's decision 
in this Shays-Meehan case because that regulation remains in 
place until the Commission writes another.
    And as we think about that we begin to realize that in fact 
even now the Internet is not unregulated. Indeed I would 
suggest that Congress might want to consider taking steps to 
further deregulate the Internet.
    Earlier you heard the Chairman, Commissioner Thomas. My 
friend made some comments about the amounts that were spent on 
Internet ads in the last campaign. He estimated it from one 
source of 14 million. That was about three-tenths of 1 percent 
of what was spent overall.
    But what is interesting is then he cited a number of 
figures that political parties and other groups had spent on 
Web and Internet and e-mail and so on. Well, how did he know 
that data? Because that is regulated activity already and it 
had to be reported to the FEC.
    In other words, even under Pence-Wynn, corporations cannot 
generally advocate the election or defeat of political 
candidates. Political parties and political candidates are 
still regulated in the money that they can take in and then use 
to spend, whether it is for Web activity or anything else. So 
it is a mistake to think that the Internet under the exemption 
either was or is unregulated or that it would be unregulated if 
you enact Pence-Wynn.
    Secondly, it is worth pointing out that there are people 
who definitely want to regulate it more. I very much appreciate 
the comments of my former colleague, Commissioner Weintraub and 
the light-handed touch that she has brought to this issue. I 
think she has been very sensitive to the concerns. But I 
disagree with her when she makes a statement that no one wants 
to regulate the Internet or unpaid blogcasting and bloggers. 
There are clearly people who want to regulate the Internet and 
want to regulate unpaid ads as well. As Vice Chairman Toner 
pointed out, the court decision is not limited to paid 
advertising, and indeed arguably paid advertising is already 
regulated.
    The exemption could be read in the same way as the current 
press exemption. If you read the press exemption literally, any 
broadcast commentary is exempt. And that would mean a 
commercial. But no one has ever interpreted this as applying to 
paid ads. But if we go beyond that and look a little bit at the 
notion of whether or not we want to limit it to paid ads, I 
just want to cite to you the comment submitted to the FEC by 
the primary House and Senate sponsors of the Bipartisan 
Campaign Reform Act, or BCRA.
    They wrote, ``the proposed rules''--this was the FEC's 
proposed rules--of ``retaining a broad exemption for Internet 
communications with the single exception of paid political 
advertising is an invitation to circumvention.''
    So clearly, there is more than just paid advertising on the 
table, and people should not be lulled into thinking that that 
is the only goal of those who are pushing for more regulation 
here.
    I think the scope is also not understood because of the 
fact that Web entities, people acting on the Web are still 
regulated if their activities amount to expenditures or 
contributions.
    And there are a number of issues that go there. We have 
talked a little bit today about small, incorporated bloggers 
and that type of thing. There is also the issue of how one 
values that. And that has come up from time to time. I think it 
is worth noting here only that at least in some circumstances 
the FEC has valued expenditures not by the amount actually 
spent, but rather by the perceived value to the campaign. And 
if that is the case, then a link which might cost just a few 
cents to be done could have a value to the campaign of many 
thousands of dollars.
    And now, the Commission is not always consistent in that 
type of application. And so perhaps it could be handled through 
some type of rule. But again to the extent that we don't want 
to rely on forbearance of the Commission there may be some 
value in Congress acting. And it is worth noting when we talk 
about the Commission being light handed, light in touch, that 
there are four seats that are up for reappointment on the 
Commission. And the regulatory lobby, the same people who say 
we don't want to limit this to paid advertising, are lobbying 
very hard to have commissioners on board who will be more 
regulatory than the current set of commissioners. So we can't 
kid ourselves about that.
    I want to conclude with just a couple quick thoughts about 
the press exemption because again there has been some confusion 
there. The people talk about the ``Halliblogger.'' ``It would 
be a horrible thing, a big corporation could have the press 
exemption.'' I want to point out that Halliburton, to use an 
example, already has the press exemption. And so do all kinds 
of big corporations. You see, the press exemption isn't based 
on who you are. It is based on what you do. And so if you are 
the Philadelphia Inquirer, you have the press exemption. And 
you have it even though the owners of the Inquirer are giving 
hundreds of thousands of dollars to the Democratic candidate 
for Senate in Pennsylvania, it appears, even though they 
announced last year that one of their primary goals was to 
elect John Kerry and they used their newspaper relentlessly for 
that purpose.
    Sinclair Broadcasting is a corporation and it is not a 
small one, and it already has the press exemption. And last 
year it ordered all of its stations to run a documentary that 
many people viewed as simply a long anti-John Kerry commercial. 
It ultimately backed off that. But it shows that corporations 
can already do these things, and they do. And they are powerful 
and they are influential.
    And Halliburton can start a newspaper or buy a radio 
station any time it wants. What is different about the Web is 
that you don't have to have that kind of money. You need a lot 
of money to get the press exemption by starting a newspaper or 
a radio network or a TV station. But you don't need a lot of 
money to start a successful Web page. And so I think it is 
important that we keep that in mind and not be distracted by 
the red herring that somebody else might, you know, gain the 
press exemption.
    The press exemption is available to any American who 
engages in press activities, and I don't think it is clear that 
the Internet is covered by that press exemption at this time. 
And I think it would be very valuable if Congress were simply 
to add to the two parts of the act that include the press 
exemption. It now says ``by periodical or broadcast,'' 
``distribute through periodicals or broadcast,'' to simply ad 
``or through the Internet.'' That would make clear that 
Internet sites do have the press exemption. And there would 
still be limits on it just as now, for example, we don't 
interpret the press exemption as getting to paid ads. We don't 
have to interpret that for the Web, but we could in that way 
give people a great deal of insurance that their basic 
editorial content they want to put out, whether they are in a 
blog or whether they are in a Web forum or however they want to 
do it, would be protected.
    Thank you very much and I look forward to questions. Thank 
you.
    [The statement of Mr. Smith follows:]

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    The Chairman. Thank you.
    Mr. Noble.

                  STATEMENT OF LAWRENCE NOBLE

    Mr. Noble. Thank you very much, Chairman Ney, and members 
of the committee. I appreciate the opportunity to appear before 
you today.
    It is beyond doubt that the Internet is changing the way 
that we do politics in this country. It is really a 
transformative tool. When television came in over 50 years ago, 
it also changed the way we did politics. But television has a 
very high threshold for entry, and that threshold is so high 
that most of us have been left as observers and not 
participants in the debate.
    The Internet is different because it does really allow a 
vast segment of society, though not necessarily everybody, a 
vast segment of society, to have access to what is a very large 
loudspeaker. But I think it is a mistake to assume that just 
because political activity on the Internet can be undertaken 
for very little money that it will not be used as an avenue for 
spending large amounts of undisclosed soft money, money from 
corporations, from labor unions that is spent in coordination 
with Federal candidates, also soft money being spent by State 
party committees where normally a mixture of hard and soft 
money would have to be spent.
    And when that type of money is spent by corporations and 
labor unions on the Internet, it poses the same potential for 
corruption and apparent corruption that you see in television 
ads, that you see on the radio or in the newspapers.
    Now there has been some talk here about drowning out 
voices, and that since everybody can get on the Internet, most 
people can get on the Internet, there is so much room that 
individuals will not be drowned out. But the reality is the 
Federal Election Campaign Act is not about equalizing voices. 
The Supreme Court has said that, that the laws are not about 
making sure everybody has the same access. What the laws are 
about is stopping apparent corruption from the large 
aggregations of wealth.
    The law is also not about the effectiveness of the ads. I 
would suggest that if the law was about the effectiveness of 
the ads, some party committee ads and even candidate ads, they 
could probably go unregulated. I think one of the fundamental 
ironies that runs through this debate is that we are hearing a 
lot today from people who are saying that because the access to 
the Internet is so easy, because you can get on the Internet 
and spending such little money that there is no need to 
regulate the Internet.
    But the fundamental irony here that is what we are really 
talking about is access by those with large aggregations of 
wealth. What we are talking about is access by corporations and 
labor unions who can spend a lot of money on the Internet. And 
for those who are saying that, you know, people are not 
spending money on the Internet, Chairman Thomas was correct, 
the Daily Kos has a place where you can sign up $50,000 worth 
of ads, though I will give them credit they said they have not 
been unable to sell that yet. But ads are being sold on the 
Internet.
    If you go on a lot of commercial Web sites or newspaper Web 
sites you are first now hit with very sophisticated ads that 
are in effect videos. Now these are commercial ads that I 
suspect cost a fair amount of money. Andas more and more 
commercial interests find it effective to run expensive ads on 
the Internet, I think you are going to see more and more 
candidates, more and more political parties, and more and more 
interest groups deciding it is effective to run political ads 
on the Internet, and run them when they are very sophisticated 
and where they are very expensive.
    But it doesn't mean that we should regulate everything on 
the Internet, and nobody is trying to regulate everything on 
the Internet. As it stand now the Federal Election Campaign Act 
has exemptions and the FEC's regulations have exemptions, and 
the FEC is working on further refining them, that allow 
individuals to set up blogs and say whatever they want. Nobody 
is talking about going after this. It hasn't happened. It is 
not going to happen.
    First of all, there is a definitional exemption if you are 
not spending any money. So for those who say, well, you can do 
so much without money, without spending money, then the answer 
is then you don't come under the campaign finance laws. There 
is also volunteer, the individual volunteer exemption that 
allows individuals to get on their computers at home, in the 
dorm room, in some ways at their work and blog to their heart's 
content and talk about which candidates should be voted for, 
and in fact they can coordinate that activity with the 
candidates. So in that sense it is no different from handing 
out leaflets, and people right now do that without having to 
hire lawyers.
    Some of these exemptions can be further expanded to allow 
people on their Web sites to spend some money on doing 
sophisticated ads or sophisticated graphics, but that is 
different again than having some labor union come in and 
working with the candidate and paying for that.
    Now there has also been the question of the press 
exemption. The Supreme Court in 1990 said media corporations 
differ significantly from other corporations in that their 
resources are devoted to the collection of information and its 
dissemination to the public. All I want to say here is that the 
concept of the media and journalism is changing. There is no 
doubt about that. I think this is a debate in some ways that 
has to be had with journalists participating. But if you say 
that every blogger is a journalist or everybody now with a 
computer is a journalist, effectively what you have said is 
that there is no special profession of journalism. Maybe that 
is the end result of this. I wonder how that is going to affect 
shield laws in the State. I wonder when a blogger is subpoenaed 
by the government for something totally unregulated whether 
they are going to try to take a shield law and whether or not a 
court will accept it.
    And one final point. It is not--and I think Congressman 
Lofgren said this. You cannot say the Internet is not 
regulated. Copyright laws are enforced on the Internet. Tax 
laws are enforced on the Internet. All we are talking about 
here is enforcing the campaign finance laws which deal with the 
spending of money on the Internet.
    Thank you.
    [The statement of Mr. Noble follows:]

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    The Chairman. Thank you.
    Mr. Sandstrom.

                  STATEMENT OF KARL SANDSTROM

    Mr. Sandstrom. Thank you, Mr. Chairman, members of the 
committee. When you are the last witness on the last panel you 
are reminded of what Congressman Udall once said, everything 
has been said but not everybody has said it.
    So I will try to say something a little different and I may 
start with something that the aging regulator and the New York 
Times might find fairly shocking. I believe that the Internet 
is entitled to greater protection than the traditional media, 
and I think that previous panel is a good example why. The 
previous panel of bloggers didn't get their job from Rupert 
Murdoch or the Sulzberger family. They are not employees of NBC 
or Disney.
    The traditional media is concentrated power. The Internet 
is dispersed power. The traditional media has high entry costs. 
The Internet has low entry costs. These differences make a 
difference, and the Internet should be treated differently 
because of the wonderful role it has played in democratizing 
our politics.
    You know, I have heard some nonsense here today. But 
nonsense sometimes dressed up in legal analysis is no more than 
a clown in a bow tie. For example, I have heard that somehow 
there was a complete exemption for the Internet put into the 
Commission's regulations. In many ways I am for a broader 
exemption, but that was never the case. For example, a labor 
union could not pay for a candidate's Internet ads. That is not 
permissible under the current law. It is not permissible 
because 441(b) prohibits it.
    All there was was an exemption from the definition of 
public communication. Yard signs are exempt from public 
communication. But not a single member on this committee would 
ever go to a corporation in their district and say purchase 
yards signs for me because they are not a public communication, 
and you can use your corporate money for that purpose.
    That just is not the case. That is not the law. And no 
amount of obfuscation can make it the law. 441(b) is a ban on 
using corporate and union funds in connection with an election, 
the purchase of ad space that is expressly advocates election 
or defeat if a candidate clearly falls within that prohibition.
    Now, this committee and the Commission will fund most of 
its efforts--if it chooses to go down this wrong path--to 
regulate the Internet will be a failure because it can't quite 
get a hold on what they are regulating. Are they regulating a 
library? Are they regulating what books you can go to and check 
out at Google? Is Google a media entity? If Google is a media 
entity, why would a blogger not be a media entity? But a 
blogger is just someone using a particular type of software. 
Why isn't my 14-year-old son a media entity since he is capable 
of putting up a Web page?
    Don't think of it as a media entity because it is not. It 
is not the Fourth Estate. It is the Fifth Estate. It is a new 
power center, and you have to grapple with that power center. 
Yes, people will lie on that power center. They will slander 
and they will defame and sometimes it will be difficult to find 
them, and that is going to make your lives more difficult.
    But let's just--for instance when people are afraid of all 
this undisclosed soft money that may be used over the Internet 
to promote, support or attack or oppose a candidate, that is an 
interesting perspective. Given that two of the three groups, I 
visited their Web sites this morning. Two of the three groups 
who took that regulation to court to challenge it have on their 
Web sites very interesting materials about Members of Congress. 
Remember we are using undisclosed money. I find that two of 
these groups--I have to put in the record--make some very 
critical comments of members of this committee by name, 
distribute this to the press, make it as widely available to 
anyone who has access to a computer, which is more and more 
every one of us.
    The other thing I would like to point out is how difficult 
your task is going to be. Right here I click that on, this is 
where you want to place disclaimers? That is CNN. If I put a, 
you know, banner ad on that, tell me how big that banner ad is 
going to appear on that screen.
    And don't forget that almost everything I get on the 
Internet is something that I as an individual citizen went out 
to retrieve. I sought the information. And maybe not 
information you want me to hear because it is critical of you, 
but I am the one as an individual citizen. And if I want to 
give it to my neighbor and my neighbor is across the country, 
in that virtual community that has been created I should have 
that ability.
    And so I think most of what you see here today and those 
who say that the Commission went too far, the problem with the 
Commission, is it didn't go far enough.
    [The statement of Mr. Sandstrom follows:]

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    The Chairman. Thank you, all three, for your testimony.
    There has been a lot of discussion about the media 
exemption, and it goes back to something all three of you said 
maybe in different directions or maybe you all feel differently 
about it, but it is well established and I think generally 
accepted by pretty much everyone that the friends of the media 
can say whatever they want about politics and campaigns and 
spend as much as they want to in doing so. And they don't have 
to worry about getting a knock at their door from the FEC, no 
matter who owns it--Disney or whoever. They will never be asked 
to explain why they chose to write something--whether they have 
relatives that lobby. Relatives get mad at Members of Congress, 
next thing you know a reporter does an article. You know we can 
all make up or talk about a lot of real life things that go on. 
So they will never be asked to say why they, in fact, wrote 
something because it was a relative that prompted them into 
doing it.
    So there are a lot of issues in play. Now, when you look at 
that, and again we don't have the FEC looking at them, so what 
would make the internet any different that we should start 
saying, ``Well, the person that started that blog is related to 
somebody, and they, you know, received money from a union or 
corporation.'' I think you understand my point.
    What makes a second tier that we start to regulate the 
Internet?
    Mr. Noble. Mr. Chairman, if I may start, first of all, I 
think it is more accurate to say that the media or the press is 
not regulated when they are acting in their press function. And 
the courts have said this. And the classic example used was 
that the New York Times can editorialize and say vote for John 
Kerry. It cannot take out an ad on TV that says vote for John 
Kerry, and it cannot take out a billboard that says vote for 
John Kerry. It has to be acting in its media function.
    Also, they can't be owned or controlled by a political 
party. So there are limits on the media. And likewise when they 
talk about--we have heard a lot about NBC is owned by General 
Electric and all the companies that own media. General Electric 
doesn't get the media exemption for its other activities. NBC 
gets the media exemption. So I just want to say we are talking 
about them being functionally working as the media.
    When you are talking about the Internet, there is no doubt 
that there are a lot of Internet entities that fall into the 
media exemption. Some of them have offline newspapers, 
obviously New York Times is on the Internet now. Some exist 
only on the Internet such as Slate.
    The question that keeps coming up is bloggers, and I think 
bloggers really present a different issue. There are some 
bloggers who probably fall within the media exemption. But 
there also are a number of bloggers I think who do not fall 
into the media exemption. But more importantly you don't need 
to reach that because they are not related to this individual 
activity. They are not regulated because there is no money 
being spent on it.
    Mr. Sandstrom. But that is just not the case. We have heard 
there is money being spent on blogs. And if the Daily Kos wants 
to give me a regular piece on its site for nothing, a regular 
ad, I will probably accept it. Others have to pay for it.
    So it isn't the case. There are many different business 
models for blogs. And I will show you how even what a 
traditional category--we talked a lot about advertising. But 
what is advertising on the Internet? Is a sponsorship of a Web 
site advertising? If I like what one of the former bloggers is 
saying, if I send him a gift, is that advertising? Sponsorship? 
Is that something that is now subject to regulation and may 
transform the degree that they are going to be regulated? And 
when is a blogger acting in his blogger capacity?
    The Chairman. We are not regulating the blogs.
    Mr. Sandstrom. But what is a blog? It is a particular type 
of software. So I am opposed to essentially regulating almost 
anything that occurs on the Internet. One, it is a futile 
effort. And two, it undermines the most democratizing 
technology that has come along, more democratizing than 
television or radio, and maybe even more so than the telephone.
    Mr. Smith. Perhaps I can add, as Commissioner Sandstrom 
says, there is a very low monetary threshold in the law. In 
fact, small amounts are spent. Many blogs now, many Web sites 
again, I kind of use blog generically for whatever is 
developing on the Web in the context of this debate. But many 
blogs now ask people for some kind of contributions: Please 
contribute to help me do this, find the time to pay for some 
space on the Web, and so on. Andrewsullivan.com has such a 
link. Steve Bainbridge, who runs a pretty popular blog called 
Professor Bainbridge, does that.
    Now if these guys collect over a thousand dollars from 
these people through the PayPal accounts, do they become 
political committees? They are spending over a thousand 
dollars. They engage in expressly advocating the election or 
defeat of candidates. And it would seem that they are political 
committees.
    So I just don't buy this notion that there is--you know, 
don't worry about it, don't worry about it. I will feel more 
comfortable when people are specific about what not to worry 
about.
    Again it seems like we hear two sides of things. Whenever 
we are in a public forum where the press might be there we hear 
a lot of soothing words about how no one wants to regulate the 
Internet, and then we get comments to the FEC saying, ``well, 
that's a mistake when you only go after paid advertising, that 
is a mistake.'' We get soothing words in the press release and 
then we get the brief that just goes into court and isn't going 
to be seen by most people that describes the Internet, 
deregulated Internet as, ``a poison pill,'' ``a loophole,'' ``a 
step backwards,'' ``anti-reform,'' ``the favored conduit for 
special interests that undermines BCRA's aims,'' an avenue that 
opens--``a medium that opens an avenue for rampant 
circumvention for all of BCRA's central provisions.''
    We sort of are hearing two things. When we had the hearing 
at the Commission, three of the groups that lobby for more 
regulation, including Mr. Noble's, made a suggestion to us that 
we consider exempting the first $25,000 that you spend. I did 
not ask this question to Mr. Noble. I did ask it of the 
counsels for the other two groups that appeared before us. ``Do 
you think we actually had the authority to do that?'' And both 
of them said, ``well, no, we don't.''
    So they are telling us you can do this. It makes them 
appear very moderate and laid back. And then I asked one of 
those two, ``Well, if we did do this, would you promise not to 
sue us?'' And he pointedly refused to promise not to sue us if 
we did pass the regulation that he was recommending we consider 
passing.
    So there are some real issues here, and I think that I 
agree entirely with Commissioner Sandstrom's point. I think he 
has put it out very well. But it is a mistake to say the 
Internet is already unregulated. That is not true. It is a 
mistake to say that if Pence-Wynn is passed it will be 
unregulated. And when we hear all the soothing words, just for 
me, you will have to make your judgment, but I find myself 
feeling rather suspicious.
    Mr. Noble. If I may respond to that, I think Mr. Smith is 
painting with a rather broad brush and ignoring a lot of very 
well stated distinctions that were drawn over time. First of 
all, we do think you need to be specific and we think the FEC 
needs to be specific, and we have talked about specifics.
    With regard to the paid advertising issue, I believe that 
was in the context of saying that if you go only on paid 
advertising, State party committees who don't pay for their own 
advertising on their own Web site are going to be able to use 
soft money for advertising on their Web site.
    The $25,000 issue is an important one. There is a question 
of whether there should be a threshold to allow use of Adobe 
software on your own Web site, to spend a lot of money on your 
own Web site to put up your own material. And we said, yes, and 
a $25,000 threshold may be appropriate. And we also said that 
the FEC may not have the authority to do that. And maybe they 
should go to Congress to do that.
    And we are not saying that the whole Internet should be 
regulated. What we are saying is that the spending of 
coordinated money on the Internet in certain circumstances 
should be regulated. We acknowledge that a lot should not be 
regulated and a lot naturally will not be regulated.
    So I don't think this is painting with a broad brush. There 
are two sides. One group says regulate everybody on the 
Internet, break into everybody's home and see if they are on 
the computer, and the other side wants total freedom from 
regulation. I don't think that is really accurate. I think 
there are more nuanced approaches than that.
    The Chairman. The bells are ringing, so we have five 
minutes for each of the members.
    Ms. Lofgren. I will be very quick. I think as someone who 
has always resisted the heavy hand of government on the 
Internet this has been a very useful hearing and of course it 
is correct the ordinary laws still do apply. The libel laws 
still work if it is online, and copyright laws are enforced and 
antitrust laws still exist. But the issue is you don't single 
out the Internet for special types of treatment.
    And as I have listened to all the witnesses it has become 
clear to me that we would just be opening up--this is a mess to 
try and do that. The one question that remains in my mind--and 
I am not suggesting that we should do this--but I would like 
people to think about it and maybe even jot some notes to me 
after the hearing--is whether a distinction should be made 
between publicly traded--for example, a Google that is in my 
district, it is publicly traded. They have a different 
relationship to the online world than the Daily Kos. I am not 
suggesting that that should be a subject of regulation. But I 
am just wondering what your thoughts are on it.
    Mr. Sandstrom. My thoughts are that Google and Yahoo are a 
greater threat right now to freedom on the Internet than the 
government is, and I think Yahoo's activities in China 
demonstrate that. I think they are driven by profit, and that 
is fine. That is how they succeed. That is how they employ many 
people in your district. But they are--with respect to--because 
they are the creators of the architecture that allows, you 
know, the suppression of speech in some of these countries I 
think worldwide, they pose a greater threat than anything the 
FEC--
    Ms. Lofgren. For example, if Google wanted to, and they 
never would do this, they could make sure that all traffic that 
Google flows through a particular site, and if you type in 
Republicans it goes to the DNC instead. Should that be or 
should it not be the subject of inquiry?
    Mr. Sandstrom. If they started doing it then certainly it 
should be because, like I say, they are the greater threat.
    Mr. Noble. I would agree that if something like that 
happened there may be a need for inquiry. But a lot has been 
raised about bloggers who incorporate for liability purposes 
and whether they would fall under the general corporate 
prohibitions.
    Ms. Lofgren. They are not publicly traded.
    Mr. Noble. They are not publicly traded and they are really 
corporations for very limited purposes. Most of them say they 
are not profit making, though maybe they would like to be. But 
I think the Congress could very well come up with a equivalent 
of what is called the NCFL exemption in the law right now, that 
the Supreme Court added, which is to say there is a certain 
class of corporations that are--or a certain class of blogs 
that are incorporated for liability purposes only that don't 
fall under the corporate rules.
    Ms. Lofgren. Maybe just those are subject to SEC 
jurisdiction. I am just thinking out loud.
    Mr. Smith. I would just say, Congresswoman, I think you 
raised a good issue. As Commissioner Sandstrom says, if that 
was to happen it might be regulatable and there are a number of 
different statutes I would suppose.
    The point I would make is that if we don't extend the press 
exemption broadly, we are oddly enough in a situation where the 
scenario where you say who could be protected under the press 
exemption, because who is going to get it? The Washington Post 
and the New York Times Web sites clearly get it. Probably Slate 
and Salon. Well, Yahoo's Web site looks an awful look like an 
newspaper, too. So they would be much more likely to spend the 
resources and have it look clearly like a newspaper and get the 
press exemption than would Duncan Black. That is the question. 
Do we want to extend the press exemption to Duncan Black? And 
that is the question that the reform community doesn't want to 
answer. And I think they don't want to answer that because I 
think their answer is no.
    Ms. Lofgren. Which I disagree with, and I am wondering is 
there a limit or is there not? Given that, that is the second 
bell, I will yield back and let Mr. Ehlers----
    The Chairman. I want to thank the gentlelady. The gentleman 
from Michigan.
    Mr. Ehlers. Thank you, Mr. Chairman. I will be very brief. 
I have no questions. I just want to say it has been very 
enlightening hearing the discussion and I am very pleased with 
the panels you have put together. I found some issues have been 
clarified my for me, others have confused me, which is probably 
appropriate.
    It is a very complex issue. You have certainly given us 
things to think about, and I went to thank you for being here.
    With that, I will yield back my time.
    The Chairman. I want to thank the Members, staff of the 
ranking member and our majority staff, and the witnesses of all 
three panels. I think it is a baffling issue in the sense 
everybody gets a little confused, but I think it is a very 
important issue.
    And with that again, I want to thank all witnesses. I ask 
unanimous consent that Members and witnesses have 7 legislative 
days to submit material for the record, that those statements 
and materials be entered in the appropriate place in the 
record. Without objection, material will be added.
    I also ask unanimous consent the staff be authorized to 
make technical and conforming changes in all matters considered 
by the Committee of today's hearing. Without objection, so 
ordered.
    And we have completed our business for the hearing. Thank 
you.
    [Whereupon, at 11:35 p.m., the committee was adjourned.]
    [Addtional statements for the record follow:]

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