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




                    INTERNET PROTOCOL AND BROADBAND
                          SERVICES LEGISLATION

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

                                HEARING

                               before the

          SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                            NOVEMBER 9, 2005

                               __________

                           Serial No. 109-68

                               __________

       Printed for the use of the Committee on Energy and Commerce


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

                               __________


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                    COMMITTEE ON ENERGY AND COMMERCE

                      JOE BARTON, Texas, Chairman

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

                      Bud Albright, Staff Director

        David Cavicke, Deputy Staff Director and General Counsel

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

                                 ______

          Subcommittee on Telecommunications and the Internet

                     FRED UPTON, Michigan, Chairman

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

                                  (ii)




                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Bowe, Frank G., Professor, School of Education and Allied 
      Human Services.............................................   125
    Clark, Tony, President, North Dakota Public Service 
      Commission.................................................   130
    Ellis, James D., Senior Executive Vice President and General 
      Counsel, SBC Communications................................    20
    Hassch, Harry, Executive Director, Community Access Center...   134
    Kimmelman, Gene, Senior Director of Public Policy, Consumers 
      Union......................................................   140
    Krause, Tim, Chief Marketing Officer and Senior Vice 
      President, Government Relations, Alcatel North America.....    24
    Mitchell, Paul, Senior Director and General Manager, 
      Microsoft TV Division, Microsoft Corporation...............    27
    Praisner, Hon. Marilyn, Member, Montgomery County Council....    34
    Putala, Christopher, Executive Vice President, Public Policy, 
      Earthlink, Inc.............................................    41
    Rehberger, Wayne M., Chief Operating Officer, XO 
      Communications, Inc........................................    64
    Salas, Edward A., Staff Vice President, Network Planning, 
      Verizon Wireless...........................................    69
    Wiginton, Joel K., Vice President and Senior Counsel, Sony 
      Electronics................................................   147
    Willner, Michael S., President and Chief Executive Officer, 
      Insight Communications.....................................    75
    Wilson, Delbert, General Manager, Industry Telephone Company.   150
    Yager, James, Chief Executive Officer, Barrington 
      Broadcasting Company, LLC..................................    83
Material submitted for the record by:
    ADC Telecommunications, statement of.........................   104
    American Homeowners Grassroots Alliance, prepared statement 
      of.........................................................   161
    Edison Electric Institute, prepared statement of.............   164
    Nichols, Willard R., American Public Communications Council, 
      prepared statement of......................................   170
    Richardson, Alan H. President and CEO, American Public Power 
      Association, prepared statement of.........................   185
    Wiginton, Joel K., response to questions from Hon. Cliff 
      Stearns....................................................   190
    Willner, Michael S., response to questions from Hon. Jay 
      Inslee.....................................................   192
    Response to questions from Hon. Cliff Stearns................   195

                                 (iii)


 
                    INTERNET PROTOCOL AND BROADBAND
                          SERVICES LEGISLATION

                              ----------                              


                      WEDNESDAY, NOVEMBER 9, 2005

              House of Representatives,    
              Committee on Energy and Commerce,    
                     Subcommittee on Telecommunications    
                                          and the Internet,
                                                    Washington, DC.
    the subcommittee met, pursuant to notice, at 10:11 a.m., at 
2123 Rayburn House Office Building, Hon. Fred Upton (chairman) 
presiding.
    Members present: Representatives Upton, Stearns, Gillmor, 
Whitfield, Cubin, Shimkus, Wilson, Pickering, Radanovich, Bass, 
Walden, Terry, Ferguson, Sullivan, Blackburn, Barton (ex 
officio), Markey, Wynn, Doyle, Gonzalez, Inslee, Boucher, 
Towns, Gordon, Rush, Stupak, and Dingell (ex officio).
    Also present: Representative Buyer.
    Staff present: Howard Waltzman, chief counsel; Neil Fried, 
majority counsel; Will Nordwind, policy coordinator; Kelly 
Cole, majority counsel; Jaylyn Jensen, senior research analyst; 
Anh Nguyen, legislative clerk; Peter Filon, minority counsel; 
Johanna Shelton, minority counsel.
    Mr. Upton. We have a lot ahead of us, so we are going to 
start just a little bit late. I will do my best with the gavel, 
remind members later, as they come, that they try to strictly 
adhere to the 5-minute rule, for questions as well as the 
opening statements. Good morning. Today's subcommittee hearing 
is on a staff draft to create a new statutory framework for 
Internet protocol and broadband services. The draft would 
update our communications laws to keep pace with the dramatic 
changes in technology and consumer demand which have transpired 
since passage of the 1996 Act. In my opinion, such an update is 
long overdue.
    In planning the subcommittee's agenda for this Congress, I 
wanted to chart an ambitious course for enactment of reform 
legislation by the end of this Congress. This year, the 
subcommittee has held four hearings on how IP-enabled services 
are changing the face of communications and the voice, video, 
and data services marketplaces, which only underscores my 
desire to get this done in this Congress. Part and parcel of my 
desire to enact legislation this Congress, I want this to be 
bipartisan legislation. To that end, Chairman Barton and I, 
along with Ranking Member Dingell, Ranking Subcommittee Member 
Markey, and our staffs, have been working for months in good 
faith to achieve bipartisan consensus. And I believe that much 
progress has been achieved, and I am encouraged that we will, 
in fact, achieve bipartisan consensus.
    In light of a dwindling number of days potentially left in 
this legislative year, Chairman Barton and I decided that it 
was important to move the process along by publicly releasing 
this staff draft before us today and holding this legislative 
hearing. I appreciate the complete cooperation of both Mr. 
Dingell and Mr. Markey on this hearing, which resulted in our 
diverse and very lengthy list of witnesses and observers before 
us today. And I appreciate all of our witnesses for being here. 
I particularly want to welcome Mr. Hap Haasch, who is from my 
district in Kalamazoo, for being with us today on behalf of the 
Alliance for Community Media.
    I want to say that I look forward to continuing our 
bipartisan discussions with both Mr. Dingell and Mr. Markey--
not to mention all the members on both sides of the aisle--as 
we move beyond this hearing and toward an eventual markup in 
this subcommittee and beyond. In order to quell the rumor mill, 
let me state for the record that we will not be marking up this 
bill next week. It was never our intention to do so, either in 
full or subcommittee. But let me make it clear, this bill is 
one of our top priorities, and I intend to work with Chairman 
Barton to move it. We have examined these issues for almost a 
year now, and it is time for subcommittee and full committee 
action.
    In terms of the substance, this staff draft rightly creates 
a new statutory framework for IP and broadband services that 
emphasizes a reliance on market forces in this competitive and 
dynamic sector, and I want to focus right now on one key 
element of that framework. The staff draft before us attempts 
to streamline the franchise process for broadband video service 
providers in order to expedite the entry of a new, third 
competitor into the video marketplace. Such competition, the 
sooner the better, will be good for consumers.
    Moreover, the staff draft makes sure that if we are going 
to depart from the legacy franchise model, that it is for a 
service which is different than today's cable service. However, 
in creating a streamline franchise process for broadband video 
services, the staff draft attempts to preserve critically 
important elements of the legacy franchise mechanism, mainly, 
(1) a 5 percent franchise fee; (2) PEG carriage requirements; 
and (3) an explicit preservation of local government's police 
powers related to the orderly and safe use of rights of way, 
including the time, place and manner for construction.
    In addition, this staff draft not only prohibits redlining, 
but also preempts State laws which prohibit municipalities from 
building their own broadband networks and offering their own 
broadband video services. That way, if a municipality wants to 
serve any or all it's citizens, it can do so. And I would ask 
unanimous consent at this point to place on the record letters 
from the APPA and the Tropos Networks in support of the 
municipal broadband provisions in the staff draft.
    In closing, I want to stress that this is a staff draft, 
and that this public hearing is an opportunity to give members 
of this subcommittee and the public a chance to debate and 
learn more about the issues. The next step will be an open, 
public markup at our subcommittee and then full committee, not 
to mention open and public proceedings on the House floor, to 
say nothing about this interprocess. Between now and the next 
step, we have plenty of work ahead of us. We will continue to 
work with members on both sides of the aisle and all interested 
parties through the entire process. Again, I want to just 
remind my members of this subcommittee that we are going to 
limit ourselves strictly to the 5-minute rule, and I have 
served a good example by finishing 1 second early. Would 
recognize the ranking nmmber of the full committee Mr. Dingell 
for an opening statement from the great State of Michigan.
    Mr. Dingell. Mr. Chairman, I thank you for your very kind 
recognition, and I am pleased to hear you discuss the staff 
draft. I am not sure whether you are indicating greater or 
lesser enthusiasm for this staff draft than I am. I had 
understood that we were working closely together, you, and Mr. 
Markey, and my good friend the chairman of the committee. But a 
funny thing happened on the way to this hearing, and we now 
find that we have a staff draft and all of the work that had 
been done by you and I, Mr. Barton and Mr. Markey, appears to 
have vanished somewhere into a black hole. I find that this is 
somewhat stressful as a trust that we have on this side, or the 
feeling that we have that there is a bipartisan effort to 
achieve a resolution of a problem, which we all agree exists 
with regard to updating the Telecommunications Act to assist us 
to have a better ball under which we could work.
    In order to assist you and my good friend the Chairman, I 
will see that our staff furnishes you and others in the 
industry with both our addresses on this side of the aisle and 
our telephone numbers so that you may know how to contact us. 
And we will also see that we have the different means of 
electronic communications that we have made available to you 
and to our friends in the industry so that you will know how to 
reach us about matters of this kind. We will either also 
instruct our staff to see to it that your staff has these 
telephone numbers because they appear to have forgotten to 
discuss with us the content of this draft. And although I will 
observe that parenthetically we were seeking to address these 
matters in good faith.
    I will be listening during the course of our future 
discussions to see whether similar good faith has been 
exercised on the Republican side of the committee, and whether 
this indicates to us that we may continue to work in a 
friendly, harmonious, open bipartisan fashion with our dear 
friends on the Republican side.
    Having said this, many of us have fought for a long time to 
remove barriers holding back competition in voice, video and 
broadband markets. The process leading to this draft 
legislation started well. In several bipartisan discussions, we 
found much common ground. Committee staff worked diligently and 
released bipartisan draft legislation in September. That was 
not perfect according to the minds of any participant, but it 
was progress. It reflected the need to find a meaningful 
balance between the policy issues and interests. The initial 
draft received mixed reviews and considerable comment, which we 
thought we were addressing in a suitable fashion. Yet nearly 
everyone appreciated the--process and found the draft workable. 
Staff began working on changes as appropriate. With regard to 
the initial draft, both the process and the substance were well 
on their way to what we thought would be a successful 
legislative achievement.
    The same cannot be said of this curious staff draft 
legislation now before us today. In stark contrast to our 
earlier efforts, this process and this staff draft was not 
inclusive or bipartisan, and, of course, the resulting product 
is, at best, a fine example of the staff's predilection on 
these matters. I am extremely displeased at this kind of 
behavior by the majority, and I observe that it threatens in a 
very significant way what had been a good working relationship 
on this matter.
    Comparing the two versions, it is clear that changes swing 
consistently, if not universally, in the direction of only one 
group of affected stakeholders. Most other stakeholders are 
worse off. Moreover, the draft before us undermines long-
standing objectives of fostering localism, competition and 
diversity. For each of the changes from the earlier bipartisan 
staff draft--and there are many--we must ask ourselves does 
this--the changes in this staff draft strike the right policy 
to usher in competition, innovation and investment that we all 
seek, and will this staff draft enable us to complete our 
business before the conclusion of this session, because good 
will has been somewhat afflicted by the results of these 
matters. Will the change have collateral effects on other 
parties? Will the change bring predictability and certainty to 
the marketplace? Or will it spawn more confusion and 
litigation?
    In asking these questions, a number of changes warrant 
close scrutiny. First, legitimate interests of the cities are 
not protected. The franchise fee provisions in the draft no 
longer keep our local governments financially whole. Although 
the draft retains the 5 percent fee, it alters revenues on 
which the fee is paid in a way that could dramatically reduce 
revenues to our cities and towns. The rights of way provision 
place new restrictions on a city's ability to manage its 
property. I would note that this was a matter of importance to 
me and my colleagues on this side because we felt that 
preserving the cities and their financial affairs intact was an 
important part of the resolution of the questions before us.
    Second, the draft marks a fundamental shift in basic and 
long-standing video obligations enacted to ensure competitive 
marketplace requirements that are statutory today, including 
must carry, retransmission consent, program excess, closed 
captioning, consumer electronics capability and compatibility, 
and retail availability are all relegated under the staff draft 
to waivable FCC regulations subject to a 4-year review that 
could result in their elimination. Does this committee intend 
to see this judgment over television policy to the whims of the 
FCC where we have suffered mightily over the years?
    Mr. Upton. Mr. Dingell.
    Mr. Dingell. Third----
    Mr. Upton. We--I tried to make it clear that we were going 
to try to limit our remarks to 5 minutes, and you are----
    Mr. Dingell. You have been----
    Mr. Upton. Two-and-a-half minutes over.
    Mr. Dingell. You have been kind.
    Mr. Upton. Very generous.
    Mr. Dingell. I----
    Mr. Upton. Yes.
    Mr. Dingell. [continuing] hope you realize that my 
enthusiasm for the----
    Mr. Upton. I just imagine if this had been the real bill.
    Mr. Dingell. [continuing] staff draft will be further 
emphasized in the balance, but I will commend this reading to 
the Chair.
    Mr. Upton. I look forward to reading every word.
    Mr. Dingell. And I will ask unanimous consent that it be 
inserted into the record.
    Mr. Upton. I would recognize the chairman of the full 
committee, Mr. Barton, for an opening statement.
    Chairman Barton. Thank you, Mr. Chairman, and thank you for 
holding this hearing. I want to make a few extemporary comments 
in addition to my written statement based on what my good 
friend Mr. Dingell just said. This staff draft is a staff 
draft, but it is a staff draft that I and Mr. Upton approve. It 
is not a staff draft that Mr. Markey and Mr. Dingell approve. 
That is part of the process. We have worked with Mr. Dingell 
and Mr. Markey and their staffs for almost a year now, and 
those have been productive discussions, and there has been the 
normal give-and-take. There is a disagreement about this latest 
draft about when it was finalized, and Mr. Dingell and I are 
going to have a meeting on that and some other issues later 
this afternoon.
    But I don't want there to be any misunderstanding, as 
chairman of the full committee, and Mr. Upton is chairman of 
the subcommittee, we want to legislate. We want to legislate in 
a bipartisan fashion. If you are going to legislate, you have 
got to make changes in drafts, and you have got to hold 
hearings on them. I made the decision last week that we were 
going to hold a hearing this week. Mr. Dingell disagreed with 
that decision, not necessarily because he didn't want to hold 
the hearing, but because he and his staff had not had time to 
have input and make some suggestions about revisions to the 
final draft, and that is the right of him and his staff and Mr. 
Markey's staff. But you cannot legislate if you don't put it 
out to the public.
    Now the first staff draft that was put out in September, I 
believe, Mr. Dingell said had mixed reviews. Well, he is being 
a gentleman about it. It was uniformly knocked. It got nothing 
but negative reviews. Nobody was for it that I am aware of. 
Nobody talked to me. So we have made some changes, and we are 
going to make some changes to this draft. That is what this 
hearing is about. And we are going to continue to work with our 
friends in the Minority. This should be a bipartisan effort, 
but I don't want anybody to be under any misunderstanding. The 
Energy and Commerce Committee, as long as I am Chairman, is 
about action. It is not about inaction, and sometimes we have 
to set timelines, and it is the chairman of the committee that 
makes those timeline decisions. So I bear total responsibility, 
and I told Mr. Dingell last week--I said, I don't want you to 
take any ownership of this if you don't want to. You can call 
it just what he just did, and he has got every right to do 
that. So I just wanted to set the record straight about that.
    Now, in my last 2 minutes and 23 seconds, I do want to 
thank you, Mr. Upton, for holding this hearing. We have had 
four hearings at your subcommittee on Internet protocol 
technology this year. We have heard from dozens of witnesses, 
and we are going to hear from several more today. They talked 
to us about the effects of new technology on voice, video and 
data markets, and they claim, and I believe that they are 
correct, that there is a need for a new, clear statutory 
framework to govern the delivery of such services.
    Our Nation's telephone laws as they are currently 
structured are based on the principals of common carriage and 
the belief that only incumbents can truly own the facilities 
that connect Americans. On the other hand, the notion behind 
America's cable law is that competition doesn't exist, and 
since no competitive forces check, the action of a monopoly 
distributor of multi-channel programming in many markets, that 
responsibility must fall to the government. That is why we are 
here today.
    The advance of technology has left the Law behind. The 
statute no longer reflects the technological and competitive 
reality. Congress has a responsibility to update our 
communications laws. This is one of the committee's highest 
priorities. Most of the folks out in the private sector that 
our governed by these laws are ready to go to work. If we do 
the new law right, there is going to be an explosion of jobs, 
growth and opportunity for American workers, and American 
consumers will get a wide array of new services that were 
unimagined just a few years ago.
    As we move forward in this process, I sincerely look 
forward to working with all members of the subcommittee and 
full committee on both sides of the aisle, especially my good 
friends Mr. Upton, Mr. Dingell and Mr. Markey, to try to 
perfect this draft. We do want to be bipartisan and we do want 
to move a bill. At one time, I had hoped we could move a bill 
before full committee this year. I am not sure that that is 
going to be possible now, but we can at least hold this 
hearing, take more comments, hopefully release another draft, 
and then maybe move to a legislative markup in subcommittee, 
and depending if we are here in December, we might actually get 
a markup in this subcommittee this calendar year.
    With that, Mr. Chairman, I am 4 seconds over and I yield 
back.
    Mr. Upton. Note of the 4 seconds. Recognize the 
subcommittee Mr. Markey for 5 minutes for an opening statement.
    Mr. Markey. Good morning, Mr. Chairman. On September 15, 
after 8 months of negotiations on the part of the staff of 
Chairman Barton, Ranking Member Dingell, Chairman Upton, Mr. 
Pickering and myself, a bipartisan consensus staff draft was 
released. That draft, while not perfect, was balanced and 
designed to treat all parties equitably, meaning from the 
perspective of all parties, unfairly. It was offered as a 
starting point from which we could reflect on suggested changes 
from all affected parties and refine the draft through 
discussion and continued bipartisan collaboration. I want to 
thank Chairman Barton and Mr. Upton for the process over those 
months which led to that bipartisan consensus staff draft.
    I am dismayed by the process, however, over the last 
several days that has led to this hearing and to the latest 
staff draft, which is neither consensus nor bipartisan. While I 
understand that some may see the unveiling of the new Barton-
Upton draft as moving the process forward, I think it is quite 
the opposite. On both the overall substance and the process, 
the Barton-Upton draft represents a significant step backward, 
and in my view, brings us further away from successfully 
legislating in this area, not closer.
    The new staff draft eliminates a provision that extended 
the prohibition on cable operators and telephone companies 
buying each other out in region. This has been the foundation 
of competition in this committee for many years. The cable 
industry challenges the phone industry, and the phone industry 
challenges the cable industry. It is a vital engine of progress 
for which this committee has been justifiably proud. While many 
of us may lament the prospect of a broadband duopoly in many 
communities, at least it is a duopoly. Deleting the provision 
which ensures competition between the cable and telephone 
industries is a terrible policy decision.
    The Barton-Upton draft also reduces the consumer 
protections required for national standards by the FCC from 11 
areas to 4 area. And it also adjusts the fundamental 
definitions in the bill. For example--for instance, the BITS 
definition is challenged in a way which raises questions as to 
whether re-sellers or aggregators of broadband service have any 
rights or any obligations to abide by network neutrality 
principles, consumer privacy protections, or consumer 
protection rules generally. The broadband video service 
definition is changed in a way that makes the platform which 
delivers the service a potential vehicle for discrimination.
    The Internet is a wonderfully chaotic, open, worldwide 
network or platform for innovation and an economic engine for 
the country. I don't understand why we would tinker with a 
model that has been so widely successfully and embraced by 
thousands of companies and millions of individuals, and on it 
to slant public policy in favor of three companies simply so 
that they can deliver movies to peoples' home. My Own Private 
Idaho was a movie. It is not supposed to be an articulation of 
America's broadband policy.
    The Barton-Upton draft also changes the basis for 
calculating franchise fees for municipalities, a shift which 
will have negative financial consequences for communities 
across the country, and that undercuts financial support for 
public access television channels.
    In addition, the Barton-Upton draft deleted the placeholder 
that had been in the consensus draft that would have addressed 
the question of the extent and timeliness of the telephone 
companies offering broadband video service to both rural and 
under-served urban and suburban communities.
    The Barton-Upton draft also departs in a major way from the 
consensus draft by changing the obligations of Bell Company 
Video Services from statutory responsibilities to mere 
regulations. In other words, the rules governing must-carry, 
sports blackouts, close captioning, indecency rules, television 
content ratings, ownership limits, consumer equipment 
compatibility, equal employment opportunity rules, program 
access, close captioning and others, can now be waived by the 
Commission upon request by the Bell companies.
    If that were not sufficient to tilt the playing field 
enough, the draft adds an additional provision requiring the 
Federal Communications Commission, every 4 years, to eliminate 
such any of the rules which it finds in its subjective judgment 
that affects meaningful economic competition.
    I am willing, as I have been throughout the year, to 
negotiate in good faith and to develop a consensus piece of 
legislation. I am dismayed that the promising path that the 5-
member offices were on toward that goal has been abandoned in 
the last week for what I see as a detour toward a likely 
legislative dead end.
    I thank the Chairman for calling today's hearing, and I 
look forward to hearing from the witnesses.
    Mr. Upton. I don't know if I should say thank you or not. 
Mr. Whitfield is recognized for 3 minutes for an opening 
statement.
    Mr. Whitfield. Mr. Chairman, thank you very much, and I 
don't think any of us are surprised that you and Chairman 
Barton have come forth with a new draft because, as Chairman 
Barton accurately stated, there was not anyone that appeared to 
be enthusiastic about the last draft. I actually am encouraged 
by this draft before the committee today because many of the 
provisions set forth offer important guiding principles toward 
improving our telecommunication laws in an era where we are 
witnessing the convergence of voice, video and data services on 
a single platform. Most importantly, the draft creates Federal 
standards for the deployment of broadband services, and I 
believe that elevating this issue from the local level to the 
Federal level accurately reflects the fact of the deployment of 
broadband services is a national priority. Without a doubt, 
consumers will benefit from these advanced services, and the 
draft before us today creates the necessary market incentives 
to make this deployment happen. And frankly, Mr. Chairman, I 
believe these changes are overdue, as we have witnessed time 
and time again by competition in the communications marketplace 
will bring much needed technological innovation and growth to 
our country, stimulating our economy and creating jobs.
    At the same time, consumers stand to reap tremendous 
rewards, I believe. It is competition and not excessive 
regulation or excessive mandates from the government that will 
stimulate lower prices, faster services, and expanded 
deployment. Although this draft, I think, has--it is quite 
obvious has not yet attained broad bipartisan agreement among 
the members of this committee, I do look forward to working 
with you and others on this subcommittee and the full committee 
to update our Federal communications laws for the Internet age. 
And I am optimistic that this committee can do so, and will not 
satisfy all of the special interest groups, but will certainly 
take into account all of their views and come out with a 
balanced final product.
    Mr. Upton. Thank you. Mr. Boucher?
    Mr. Boucher. Thank you very much, Mr. Chairman. The draft 
which is before the subcommittee is a generally well-balanced 
proposal, and I think it is a useful starting point for this 
subcommittee's work. It requires a regulatory light touch for 
Internet applications, much along the line that was recommended 
by the gentleman from Florida Mr. Stearns, and by me, in a bill 
that we previously introduced.
    The draft before us establishes a clear right for 
municipalities to offer telecommunication services. Broadband 
facilities will define the arteries of commerce in this 
century, much as canals, railroads and highways were the 
pathways for the economy of earlier eras. For many smaller 
communities, the municipal provider of broadband may be the 
only provider, or it may be a critical second provider, 
assuring that services are affordable. In larger communities, 
low-cost WiFi-based mesh networks can assure the wide 
availability of wireless high-speed Internet access when 
deployed by local governments. The draft assures that 
localities can offer these services as long as they abide by 
the same rules that they impose on private sector providers.
    I think it is essential that we provide franchising relief 
for multi-channel video providers if we are serious about 
welcoming competition by the telephone companies in this 
market. The draft provides that relief while assuring that all 
providers pay local franchise fees and offer PEG channels.
    While I think the draft broadly strikes the right balance 
regarding municipal networks, the scope of permissible 
regulation of Internet applications and video franchising, I 
have concerns about the way the draft addresses network 
neutrality. This provision needs additional work. Following the 
Brand X decision and an FCC rulemaking, it is now clear that 
broadband platform providers need not accommodate unaffiliated 
Internet access providers. In the absence of that open access 
for unaffiliated ISPs, the need for a firm network neutrality 
provision is all the more apparent. It will be our only 
assurance that the Internet remains open and seamless as we 
expect it to be, and as the full utilization of that medium 
requires that it be.
    In simple terms, network neutrality will assure that any 
Internet user will be able to reach any website of his choosing 
and be able fully to enjoy the services that are offered by 
that website without interference by the broadband platform 
provider. The platform operator should not be permitted to 
manage the network in a manner that favors his content services 
to the disadvantage of the unaffiliated content provider who is 
Internet-based.
    The draft contains ambiguous language that permits the 
platform operator to offer enhanced quality of service to 
subscribers and to impose compacity limitations on subscribers. 
While I acknowledge the need for broadband providers who make 
substantial investments in building networks to be able to 
offer a high-quality service through their video, their VoIP, 
and their other offerings, the language should be modified to 
assure that the platform operator cannot interfere with the 
delivery of services from unaffiliated Internet websites and 
that sufficient bandwidth will be available on the platform to 
accommodate the unaffiliated services.
    Mr. Chairman, I look forward to working with you and with 
the members of the subcommittee and with interested external 
parties as we seek to achieve that goal. Thank you, and I yield 
back.
    Mr. Upton. Mr. Gillmor?
    Mr. Gillmor. Thank you very much, Mr. Chairman, and thank 
you for holding this hearing. And I want to applaud your hard 
work and your leadership, and Mr. Barton's, in developing this 
revised draft bill. I also appreciate all the panelists being 
here.
    Mr. Chairman, we were both members of this subcommittee 
when Congress last updated the telecommunications law, and at 
that time the Internet was in its infancy, and cell phones were 
the size of masonry bricks, and Blackberry was only recognized 
as a fruit. None of us could have imagined the technical 
advances that have taken place since the Telecom Act of 1996 
was signed into Law, advancements such as voiceover Internet 
protocol, on-demand media services, wireless web access to even 
the most rural of areas have Americans becoming increasingly 
dependent on the technology of the present, as they will become 
even more so on the technology of the future. And I am pleased 
to see that there have been so many positives, so many 
bipartisan forward-thinking provisions within this second 
discussion draft that attempt to address many of our future 
needs.
    As we begin the process of updating our current laws, I 
think we need to listen to the message that history left us: 
burdens from government-imposed regulations smothers the 
development of emerging technologies and limits long-term 
investment in this sector of our economy. The areas that are 
being addressed in the staff draft has become prominent largely 
due to government inaction. Recognizing that technological 
advancements are the driving force behind the future health of 
our Nation's economy, it is vital that we also recognize our 
Constitutional oversight authority to make certain that this 
segment of our economy continues to grow.
    I think, as you do, that we ought not rush this process, 
but we have to be sure that we listen to all the stakeholders, 
including our constituents the American consumers, to ensure 
that we do out best to address the needs of this very fluid 
industry and to foster the spirit of competition. So I look 
forward to what emerges from these hearings, and, Mr. Chairman, 
I did want to commend you for your determination to assure that 
America continues to be the bellwether of technological 
advancement throughout the global marketplace. And I yield back 
all 16 seconds.
    Mr. Upton. Mr. Doyle?
    Mr. Doyle. Thank you, Mr. Chairman. Mr. Chairman, I have 
tried to approach these issues that come before this 
subcommittee with the goal of creating telecommunication 
policies that will lead to increased competition within 
industries and more benefits for consumers.
    IP technology has the potential to do just that in no time 
at all. This technology will change every aspect of competition 
within the telecommunications industry, and it is our job to 
see that as the state of competition evolves, we have policies 
in place that do not unfairly tilt the playing field in one 
direction or the other. Vibrant competition benefits us all 
because it benefits our constituents. I have said before that 
most of my constituents are probably more concerned about 
finding a way to get the same voice, video and data services 
they currently get only at a cheaper rate. However, the promise 
of IP technology is undeniable. We will see new services like 
video and voiceover IP that look, feel and act similar to old 
services like cable and satellite television and traditional 
phone service.
    The question is should we pass laws that treat the 
providers of these new services more favorably than we treat 
existing providers simply to encourage entry into the 
marketplace, or if regulatory obligations are reduced for a new 
entrant, should we then go back and reduce these obligations on 
existing providers? And if we do either of those things, what 
will be the affect on consumers? I look forward to hearing from 
out witnesses on this subject because I am reluctant to create 
winners and losers in this area simply based upon the services 
are delivered to consumers.
    I also want to highlight one issue that is very important 
to me as a Member of Congress who has 54 separate political 
subdivisions in my district, and that is the issue of franchise 
agreements. Franchise fees have been an important revenue 
source for municipal budgets since the beginning of cable 
television. And I know that some of our witnesses feel that the 
pace of negotiating franchise agreements can affect your 
ability to vigorously compete in the marketplace, however the 
system we have in place today ensures that local voices are 
heard, and that communities are compensated for the use of 
public right-of-ways. If a franchise process is streamlined, 
who will my city council members have to call if a problem 
arises with a provider? And will there be anyone to answer that 
call and give it the attention that it deserves?
    I have also heard that in addition to streamlining the 
franchise process, this discussion draft could drastically 
reduce the amount of money franchise fees generate for 
municipalities. A narrow definition of gross revenue that only 
includes money collected from subscriber fees and does not 
include other generally accepted forms of revenue such as 
advertising fees, will cost Pennsylvania municipalities 
millions of dollars. This would be a devastating blow to my 
district at a time when all of these political subdivisions are 
being forced to cut or reduce municipal services.
    In closing, Mr. Chairman, I want to thank our witnesses for 
agreeing to appear today. I look forward to hearing what they 
have to say, and I yield back my time.
    Mr. Upton. Mr. Terry?
    Mr. Terry. I waive.
    Mr. Upton. Mr. Ferguson?
    Mr. Ferguson. Thank you, Mr. Chairman. As this country 
migrates toward a completely digital communications system, I 
think it is important that we provide consumers and 
communications providers with legal and regulatory certainty to 
continue to offer new and innovative services. This discussion 
draft takes an important step toward that goal. Specifically, I 
commend you, Mr. Chairman, for your focus on the voiceover IP 
technology and Internet telephone providers.
    VoIP technology allows any broadband Internet connection to 
be a virtual telephone that provides consumers with affordable 
and innovative voice services. I know first-hand of the 
benefits of this technology for our economy as VoIP providers 
like Vonage which has created over 1,600 jobs in my State of 
New Jersey. They offer VoIP services as an affordable 
alternative to traditional wireline telephone service.
    Also of utmost importance is a competitive environment for 
consumers, an environment that provides them with the most 
options for their dollar, and assures that these new services 
are both affordable and attainable. To reach this goal, we need 
to establish a framework that ensures a level competitive 
playing field for all industries that provide these exciting 
new offering. By doing so, we will ensure that the consumer 
market gravitates to consumer demands and at the same time 
enables the development of sustainable and genuine competition 
for all of our constituents.
    I look forward to hearing from the witnesses present here 
today as to how we can achieve these goals as we move forward. 
And, again, I commend Chairman Upton, Chairman Barton, and 
others, who have worked on this important next step in the 
process. I yield back.
    Mr. Upton. Mr. Gonzalez?
    Mr. Gonzalez. Thank you very much, Mr. Chairman. And I am 
going to be brief, maybe not use--well, I have got 2 minutes so 
I will hurry then. But I will be a mind reader today, and I 
believe that I can read the minds of all the witnesses and 
everybody out there in the audience, and that is how do you 
stay out of the line of fire of what is going on up here 
regarding process. But please understand how important it is, 
please put it in context of where we are coming from on this 
particular issue of process.
    First of all, process will always determine the end 
product. We know that. So it is important that the Minority be 
part of the process. Majority does the majority's will and does 
rule at the end of the day because they are the majority, but 
it does so by respecting the rights of the minority for a good 
reason, and hopefully that is what will happen here.
    Also understand that this particular staff draft in its 
consideration and the hearing today comes on the heels of a 
couple of other measures that were considered here, and that 
was the Energy Bill #2 and, of course, the Digital TV and 
Medicaid legislation which of course we believe was foisted 
upon the members of the Minority's side without much input, and 
even during the process, we weren't really, truly included in 
any significant measure. I don't believe that it is too late. 
We are still in the process, and we will jump into the middle 
of it even if it is a later stage. And I yield back the balance 
of my time.
    Mr. Upton. Thank you. Mr. Shimkus?
    Mr. Shimkus. I will pass, Mr. Chairman.
    Mr. Upton. Ms. Blackburn?
    Ms. Blackburn. Thank you, Mr. Chairman. I want to thank you 
for holding the hearing today, and I want to thank you, and 
Chairman Barton, and your staff for the hard work that has gone 
into producing this draft. As you know, my colleague 
Representative Wynn and I introduced the Video Choice Act to 
streamline the process new entrants must undergo to offer video 
service. We believe that cutting red tape will not only lead to 
more choices for consumers, but will greatly increase broadband 
deployment in the country. It is my hope this draft, the 
subsequent bill, and an updated law will provide the needed 
relief for all new entrants.
    Since the U.S. has fallen to 16th in broadband deployment, 
the time to act is now. Today, if the local telephone company 
wants to string fiber to the home of every single constituent 
in my district and provide high-speed Internet access and voice 
telephone service, the company does not need to obtain any 
additional authority from the local government. However, under 
current law in most States, if that company later decides it 
wants to provide video over the same lines, it now has to go 
through local video franchising process in each and every 
locality. The process will take years; it will cost millions. 
In my opinion, it is a process that is counterproductive to 
achieving U.S. superiority in broadband deployment, access and 
usage. In today's competitive communications world, the local 
franchising rules are out of place. The Texas legislature got 
rid of them, and now the phone companies are investing more in 
Texas, creating more jobs and more competition. Congress should 
do the same. Under the committee draft, the localities are 
indeed made whole by retaining franchise fees and PEG channels. 
Consumers will benefit from having faster, enhanced Internet 
access, competitive video service, more choice at lower cost. 
Local governments will have more revenue. It is the right 
policy and we should move quickly to make sure that franchise 
reform is adopted during this Congress.
    I look forward to hearing from our panelists.
    Mr. Upton. Mr. Inslee?
    Mr. Inslee. Thank you, Mr. Chairman. You know, while we are 
having this convergence in the industry in telecommunications, 
we would like to see some convergence in the Republican and 
Democratic parties. And I think that is very important in 
telecommunications policy for the long run, and that is why, 
although I am dismayed at the moment, I am hopeful that that 
will continue because I think it is very important that this 
industry, and the tremendous creative abilities it represents, 
are not disadvantaged ultimately by some partisan divide. So I 
hope this discussion continues.
    I want to make a couple comments about this draft. It is 
encouraging, I think, that there is some streamlining of the 
video franchise process. The competition in that marketplace, I 
believe, will benefit consumers. It is my hope that this market 
will drive a more robust broadband deployment. With that, 
though, I urge my colleagues to seek a franchise policy that 
really does keep local governments whole and maintains local 
government control of the rights of way.
    Second, one of the most important and positive aspects of 
this draft, I believe, is the provision seeking to maintain 
America's Internet freedoms. Section 104, which is called the 
Net Neutrality Requirement, will help to ensure that Americans 
have unfettered access to the greatest possible choice of legal 
Internet content and services, and can connect any un-harmful 
device of their choice to the broadband network. This 
connectivity principle enshrined in this provision is good, but 
they must be further strengthened to give Americans an air-
tight guarantee to Internet freedom. Internet access through a 
broadband video service is still Internet access, so it should 
also adhere to these Internet freedom requirements.
    Third, our concerns that much of the broadband regulations 
imposed in Internet services may unnecessarily capture services 
that do not need to be regulated. We should not regulate 
Internet services such as Google, Yahoo, Amazon or MSN. These 
hereto four unregulated services, such as free email, have made 
use of the Internet but have not made the actual connection to 
the consumer. We should be careful not to regulate any service 
that is not a substitute for capabilities to send and receive 
voice communications.
    With that, I look forward to restoring the bipartisan 
tradition in this industry. Thank you.
    Mr. Upton. Mr. Sullivan?
    Mr. Sullivan. Thank you, Mr. Chairman.
    Mr. Upton. You need to hit the button.
    Mr. Sullivan. Thank you, Mr. Chairman. It has been a long--
this--I thank you for holding this hearing. It has been a long 
time coming. The Internet has revolutionized our lives. It has 
had a dramatic impact on the way we communicate, and our laws 
must reflect those changes. Services based on Internet protocol 
are the wave of the future, and we can't bury our heads in the 
sand. We must address the public policy concerns this 
technology raises within the telecommunications industry.
    The regulatory and technological world we face today is not 
what we faced 10 or 15 years ago, and that is a simple fact. I 
am pleased that this draft addresses consumer protection 
standards and ensures access to customers regardless of income. 
Also PEG requirements in this draft are comparable to current 
service providers, and the draft continues the current 
management of right-of-way. This is critical for our 
communities to have control over their operations, and it has 
appropriately been addressed in the language before us.
    The ability for IP to enable so many diverse technologies 
is a huge benefit for my constituents and all Americans. 
Competition--fair competition drives innovation by driving down 
prices and increasing choices for consumers. Any barriers that 
impede competition should be eliminated. The fact of the matter 
is these technologies will affect us all. You, me, all of my 
constituents, everyone will benefit. The free market works if 
we will let it.
    I look forward to the testimony and I yield back.
    Mr. Upton. Mr. Gordon?
    Mr. Gordon. I am ready to listen to the witnesses, Mr. 
Chairman.
    Mr. Upton. Mr. Towns?
    Mr. Towns. Thank you very much, Mr. Chairman, to provide us 
an opportunity to get some additional information. As we stand 
on the verge of realizing the competition we had all envisioned 
in 1996, I am anxious for everyone to benefit from current and 
future technological innovations. It is great to see the 
technology communities spurring the competition that the market 
needs, and we should strive for a regulatory framework that 
encourages it. By having multiple interests into the video 
services market, customers will have more benefits, positive 
investment in networks will be encouraged, and more jobs will 
be created. I am eager to see a widespread deployment of the 
technologies we have been discussing over the past year.
    The services and devices that have been shown to be are 
incredible, and their availability to everyone in every 
community is vital. I am confident that our industry friends 
recognize this and will govern themselves accordingly. My 
constituents are excited about the communication technologies 
that exist today and want to see more innovation, more choice, 
and, of course, lower prices in the future. I am pleased that 
the cable companies are aggressively competing against the 
Bells for telephone products, and that companies like Verizon, 
SBC, have plans to compete against the cable for video 
services.
    But for this innovation to occur, Congress needs to set the 
rules of the road, and we need to get it right the first time 
to prevent accidents. I hope we can advance this issue 
properly, and more importantly, in a bipartisan manner, Mr. 
Chairman. Let us keep in mind we should not create a regulatory 
burden that stops technology from initially reaching our 
constituents, but we must create a playing field that is level. 
We don't want winners and losers.
    So on that note, Mr. Chairman, I yield back, and I am 
anxious and eager to hear from the witnesses.
    Mr. Upton. Mr. Bass? Mr. Stearns?
    Mr. Stearns. Thank you, Mr. Chairman, and I thank you for 
holding this hearing. It looks like you have a full house here, 
and I notice they are outside standing in the hallway. This is 
reminiscent of the Telecom Act of 1996. And I suspect after 
your first draft in September, you got everybody's notice, and 
now with the second draft, there seems to be more concern. But, 
I want to compliment you because myself and the staff had some 
concerns about the first draft, and they are significant 
changes, we felt, and we helped bring about, and so I want to 
thank you for some of those changes. I think in the end what 
most of the people in the audience are concerned about is 
regulatory certainty and legal certainty, and that any business 
would appreciate because they can't invest the capital unless 
they are pretty sure that they have this certainty. And so it 
is important that we continue to have these hearings, and I 
compliment you in having all of these panelists because a lot 
of members who won't be here, I say to the audience, will be 
listening to them in our offices because of the importance of 
this bill.
    For the past couple years, my colleague Mr. Boucher and I 
have been working on getting new treatment for IP-enabled 
services and TV, and to a certain extent, we think we can 
accomplish these goals. I think to a larger degree the staff 
draft takes a significant step, as I said earlier, in this 
direction, but obviously I think we can still make 
improvements. I think my colleague--I agree with him when he 
contends that the Net Neutrality Standards in this draft should 
be strengthened. It is important to all of us. But, again, 
without this certainty and without this regulatory certainty 
and this legal certainty, we as Members of Congress will not 
give the industry the ability to innovate.
    And I have also said, Mr. Chairman, with the high-
definition television, third generation wireless and broadband, 
that this economy will be transformed into a whole new economy, 
and the GDP will go forward at quantum jumps, and it will have 
a higher standard of living for all Americans. And this bill 
and what you are doing today, Mr. Chairman, is going to do 
that. So in a larger extent, this hearing today with all these 
panelists--witnesses, is really creating a higher standard of 
living for all of Americans and creating more jobs, higher 
paying jobs, and ultimately making this country more 
competitive. And I thank you, Mr. Chairman.
    Mr. Upton. Mr. Rush?
    Mr. Rush. Thank you, Mr. Chairman. Mr. Chairman, we have 
got a platoon of witnesses before the committee today, and I 
just want to reiterate and state without any unclarity that my 
position is that every crook and cranny of this nation should 
have access to the Internet services. And with that, Mr. 
Chairman, I will pass on my statement--on my official 
statement.
    Mr. Upton. Mr. Pickering?
    Mr. Pickering. Thank you, Mr. Chairman. And I want to thank 
the panelists and everyone that has been working on the two 
drafts. Let me say to my friends on the other side, there are 
many issues on the committee where we are simply not going to 
agree and will have philosophical and partisan differences. But 
the history of this committee has been on telecom that we have 
been able to work things out in a bipartisan way, whether it is 
energy, environment or health care, those are areas that 
perhaps we have irreconcilable differences. But on this 
particular area, telecom, where we have had some great 
accomplishments, I still believe that we can and should work in 
a bipartisan basis. For 7\1/2\ months, staffs worked on the 
first draft, and sometimes when you work in that way and you 
try to do it as a member-led process, versus an industry-led 
process, the first reaction from industry is that no one likes 
it. Now you could say that is a good and fair thing, or you 
could say maybe we got it wrong. What we hope is in these 
hearings is to learn the differences between the first two 
drafts, use this draft and the first draft as a catalyst to 
reach consensus. I do hope, Mr. Chairman, that we reestablish 
and reengage in the bipartisan process of working together to 
find the common ground as we go forward.
    And let me set forward the principles that I hope that our 
process and our work will lead us to. It should be driven to 
establish clear preemption policy, clean entry policy, 
competition not just for one sector of communications but 
competition to expand and thrive in each sector of 
communications, and that we find a way to do that in a 
competitively neutral and a technologically neutral way. I do 
think that we can find that common ground. I think the bill 
makes improvements as we look at telco entry into cable and 
into video, and in that market, that will expand competition.
    At the same time, I have concerns that if we do not have a 
clear interconnection standard, or interoperability standard, 
that we will not have the corresponding ability to maintain 
competitive markets in voice and in data. It is very important 
that as we look at the engines of innovation and investment and 
competition, the Internet providers, whether they are content 
or whether they are voice, that we make sure that they are not 
subject to tolls or fees or the Internet freedom and that they 
still can provide competition both to video and telcos.
    At the end of this day, we want to say we have deregulated. 
We have set a cleaner policy, a clearer policy, but we have 
increased competition. And by increasing competition, you will 
increase investment and innovation in each sector. Those are 
the goals and the principles that I will be going by, and I 
think that this committee, whether it is energy or healthcare 
or whatever we have tried to do, the Chairman has tried to take 
a principle approach of increasing competition wherever we make 
policy. And I think that if we do that, we will come out ahead 
for the American people and for this committee, and we should 
not simply try to please one sector while leaving out every 
other sector.
    So that is the guidepost that I will be using, and I look 
forward to working with the Chairman and the rest of the 
committee with that bipartisan process and with those 
principles. Thank you, Mr. Chairman.
    Mr. Upton. Mr. Stupak?
    Mr. Stupak. Thank you, Mr. Chairman. This subcommittee has, 
and will continue, to have disagreements about policy issues, 
but we have largely kept partisan politics out of this 
subcommittee. It is a tradition we can be proud of, and I look 
forward to working with my colleagues on this draft as the 
process moves forward.
    I believe from our subcommittee hearings, as well as my 
many rural caucus forums, that we have a delicate job ahead of 
us. We must draft legislation in a way that doesn't overly 
burden our brightest innovators with laws that can't possibly 
change as fast as they innovate, but, at the same time, 
respects the importance of cities' and States' consumer 
protection laws and social obligations, including Universal 
Service Fund on which our communications law has been built.
    In addition, we won't have done our job if any rewrite 
doesn't recognize the special needs and challenges of rural 
communities and communication providers who serve those 
communities. Broadband is critical for our children, our 
hospitals, our public safety officers, and our businesses to 
thrive in the 21st Century. Our rural communities understand 
this as much as anyone. But while the commitment to rural 
communication providers and community leaders is unlimited, the 
resources are not. Congress has a duty to match rural America's 
commitment. It is clear that we must do better. Despite 
advances in new technologies to help bridge the digital divide, 
broadband is still vastly under-deployed in rural America.
    The Communications Act of 1996 did a lot of great things. 
It spurred competition and brought us to where we are here 
today. Cable, phone, wireless competing and offering better 
services. The 1996 Act also expanded the Universal Service Fund 
to bring broadband to community hospitals, schools, libraries, 
and it is time we take another look at the fund. USF faces 
challenges from the growing demands on the fund and a shrinking 
pool of contributors. We have to meet those challenges head-on.
    While the staff draft directs the FCC to study expanding 
the contribution base to include VoIP providers, I believe the 
language could be stronger to reflect the importance of the 
fund for rural America. I believe this draft is a good first 
step, but we need to be careful not to let the process get 
ahead of policy. That is why I look forward to hearing from our 
witnesses today and in the coming weeks about how we can refine 
the draft to better meet the needs of consumers, set out fair 
and clear rules, and promote competition. I look forward to 
working with the chairman, and Ranking Member Dingell, and my 
colleagues on the committee, to make sure that all communities, 
large and small, urban or rural, are connected to the future. 
Thank you, Mr. Chairman. I will yield back.
    Mr. Upton. Thank you. Ms. Wilson?
    Ms. Wilson. Thank you, Mr. Chairman. I think it is pretty 
clear that we are on the cusp of returning to a duopoly in 
wireline service which makes any revisions that we undertake in 
the Telecom Act particularly important, and I think we need to 
very carefully think about the direction we are going on.
    The draft that we now have is a significant departure from 
the one that we saw earlier in the year, and that concerns me, 
particularly as the one that we saw earlier in the year, I 
think, was a bipartisan draft. And it concerns me if we move 
forward too quickly based on this current draft--piece of 
legislation and the imminent approval of the mergers of four 
large telecommunication companies into two huge 
telecommunication companies for wireline.
    I would also like to look at these problems and these 
issues from the perspective of consumers, and consumers have 
benefited tremendously from competition in telecommunications. 
We need to make sure that competition continues to be what 
drives innovation and low prices, and anything we do in the 
Telecom Act has to have that first and foremost.
    And I yield the balance of my time.
    Mr. Upton. Mr. Wynn?
    Mr. Wynn. Thank you, Mr. Chairman. Mr. Chairman, with your 
indulgement, I am going to defer my opening statement, but I 
would like to take a moment to recognize one of the outstanding 
local officials from my district, the only woman on the panel 
before us today, the Honorable Marilyn Praisner. She is here 
wearing many hats. She is speaking on behalf of the National 
Association of Telecommunications Officers and Advisors, the 
National League of Cities, United States Conference of Mayors, 
and the National Association of Counties and Telecommunity. And 
I think that that reflects the fact that she has exercised over 
the years a great deal of leadership nationally as well as 
locally on telecommunication issues. I have had conversations 
with her about aspects of this bill and they have been very 
productive conversations. I know she is concerned about 
protecting the interests of local governments, particularly 
their revenues, their management of rights-of-way, and 
protecting consumers interests. I am sure she will share those 
views with the committee and we will be better for it. But I 
just wanted to say we are in the presence of an outstanding 
American and local leader, the Honorable Marilyn Praisner. 
Thank you for joining us today, Ms. Praisner.
    Mr. Upton. Gentleman yield back his time?
    Mr. Wynn. Mr. Chairman.
    Mr. Upton. Gentleman from Indiana?
    Mr. Buyer. I would ask unanimous consent for me to 
participate in this hearing to ask questions of the witnesses 
to give an opening statement.
    Mr. Upton. Any member have an objection? Hearing none, the 
gentleman is recognized for an opening statement for 3 minutes.
    Mr. Buyer. Thank you, Mr. Chairman, not only for your work, 
but also that of the ranking members and their staffs. I agree 
with my colleague Mr. Towns when he has talked about getting it 
right, and I would say to my friend, Ms. Wilson, part of the 
problem we have--I don't even want to call it a problem--part 
of the concern that you may have about you see major industries 
coming together, we caused that, because we over-regulated on 
voice and we deregulated on video. The deregulation on video 
spurred innovation and competition. There is an explosion based 
on conversions technologies and consumers are beginning to 
benefit. A the same time, you have got this over-regulation 
that Congress put place on voice and it has created great 
pains, so these are going to survive if--and they are going to 
try to be innovative themselves. So as we move forward, I agree 
with my friend Mr. Pickering when he laid out some of his 
themes or principles because I have mine too, and that is 
respect the free markets. You do that to ensure a forum that is 
open, fair and competitive. (2), we need to deregulate for 
economic security, and that means that the pathways to foster 
innovation and competition. (3), I agree with themes that are 
being used out there in industry and around the hill, and that 
is to--if you must regulate, then do so on service, not on 
technology. And that is the error that we made back in the 
first Telecom Act. And I also agree with the theme about 
regulating on parity. Also about the empowerment of consumers 
to ensure there is choice. And, in fact, making sure that we 
have a good balance between our Federal and State jurisdictions 
on the consumer protection, and who are we--how are we going to 
increase the access and who all will participate in the USF.
    Last, I would mention is with regard to franchise fees. 
These franchise fees should not be an entry barrier to the 
marketplace. At the same time, I would think that cable would 
love to end what is happening out there in all these little 
towns and cities all across America whereby you enter the 
renegotiations and, oh, by the way, we need you to do this. We 
need some upgrade at the park. Can you help us with this and 
that? And they slip you the list. If that isn't as close to 
blackmailing the marketplace, I have never seen it. So I am 
sure that you would love to end that out there, and, you know, 
I am intrigued and I like what Florida has done.
    I mean, Florida has an entertainment tax. We call it a fee. 
But if you just go to a straight fee on entertainment and let 
everybody openly compete, it has some attractive features to 
it.
    So let me be circuitous and I will end where I opened, and 
that was with Mr. Towns' comments on getting it right. I want 
to thank all the witnesses for being here. I want to thank the 
committee staff. I--on the other side of Ms. Wilson, I was 
concerned about the first draft, so I think the second draft is 
a much more improvement than the first draft, but we still have 
a way to go, and I appreciate your being here, and let us keep 
it going. Yield back.
    Mr. Upton. Thank you, Mr. Buyer. At this point, we are 
ready for our opening statements. Hooray. We are welcomed by 
Mr. Jim Ellis, Senior Executive VP and General Counsel of SBC; 
Mr. Tim Krause, Chief Marketing Officer and Senior VP of 
Government Relations of Alcatel North America; Mr. Paul 
Mitchell, Senior Director and General Manager, Microsoft; the 
Honorable Marilyn Praisner, Member of the Montgomery County 
Council, Montgomery County, Maryland; Mr. Christopher Putala, 
Executive VP of Public Policy for EarthLink; Mr. Wayne 
Rehberger, CEO of XO Communications; Mr. Edward Salas, Network 
Planning for Verizon Wireless; Mr. Michael Willner, President 
and CEO of Insight Communications, New York; Mr. James Yager, 
CEO of Barrington Broadcasting Company on behalf of the 
National Association of Broadcasters. Welcome you back as well.
    Ladies and gentlemen, we are prepared for your opening 
statements. I very much appreciated the opportunity to peruse 
them last night, and for a lengthy period of time, so thank you 
for getting them to us in advance. We will try to adhere to the 
5-minute rule to our ability. I would note we are expecting 
votes about 11:45, so we will go as far as we can.
    Mr. Ellis, we will start with you. Your statements are made 
part of the record in their entirety, so go ahead, Mr. Ellis.

 STATEMENTS OF JAMES D. ELLIS, SENIOR EXECUTIVE VICE PRESIDENT 
  AND GENERAL COUNSEL, SBC COMMUNICATIONS; TIM KRAUSE, CHIEF 
    MARKETING OFFICER AND SENIOR VICE PRESIDENT, GOVERNMENT 
    RELATIONS, ALCATEL NORTH AMERICA; PAUL MITCHELL, SENIOR 
DIRECTOR AND GENERAL MANAGER, MICROSOFT TV DIVISION, MICROSOFT 
 CORPORATION; HON. MARILYN PRAISNER, MEMBER, MONTGOMERY COUNTY 
 COUNCIL; CHRISTOPHER PUTALA, EXECUTIVE VICE PRESIDENT, PUBLIC 
 POLICY, EARTHLINK, INC.; WAYNE M. REHBERGER, CHIEF OPERATING 
 OFFICER, XO COMMUNICATIONS, INC.; EDWARD A. SALAS, STAFF VICE 
   PRESIDENT, NETWORK PLANNING, VERIZON WIRELESS; MICHAEL S. 
    WILLNER, PRESIDENT AND CHIEF EXECUTIVE OFFICER, INSIGHT 
   COMMUNICATIONS; AND JAMES YAGER, CHIEF EXECUTIVE OFFICER, 
              BARRINGTON BROADCASTING COMPANY, LLC

    Mr. Ellis. Mr. Chairman Barton, Chairman Upton, Congressman 
Dingell and members of the committee, good morning, and thank 
you for the opportunity for SBC to present its views on the 
staff draft.
    Today competition and innovation have unquestionably 
changed the way we communicate, the way we use the Internet, in 
fact, even the way we watch television. It is happening in a 
continual pace, and it reflects the marketplace conditions that 
exist today. But despite these great strides, much of our 
industry remains subject to a shifting regulatory environment 
that inevitably is going to threaten some of this progress in 
various ways. That is why we support the staff draft.
    We believe it puts in place a more predictable national 
framework that will be important to the next generation 
services and networks. The staff draft reflects an important 
fact, a reality, and what is important to the future is less, 
not more, regulation. We have any number of examples from our 
industry that make that very clear. If you look at wireless, 
that is an opportunity where there was no pervasive regulation. 
The result has been an absolute flourishing of opportunity and 
new services in the wireless business. We have gone from 30 
million subscribers just 10 years ago, to over 200 wireless 
subscribers in this country. There are more wireless phones 
today than there are wired phones. Rates have gone from 50-60 
cents a minute not many years ago to pennies today.
    The same thing has happened with respect to the broadband 
market. It didn't exist a few years ago, but we have seen it 
flourish with very light regulation, both by the States and at 
the Federal level. Today broadband services are--roughly 40 
million subscribers have broadband services, and the rates 
reflect a decrease from $40-50 not many years ago to less than 
20 today by SBC and a number of providers.
    Voice over the Internet services, VoIP, same thing. Minimal 
regulation. The service is flourishing. One incumbent that 
hasn't been around very long has 1 million customers. Some say 
Skype is adding 100,000 a day around the world. That is the 
reality of the marketplace. Even with respect to traditional 
telephone services where the regulations encourage entry 
without legacy--burdening the new entrants with legacy 
regulations, have had a dramatic impact. We have seen that in 
long-distance. In 1984, $20 got you 50 minutes of long-
distance. Today, that same $20 will get you unlimited long-
distance. Same thing with respect to the whole package of 
local, long-distance and vertical services. In the last 5 
years, those rates have gone down 30 to 40 percent when you 
include the bundling discounts.
    The one area where we have not seen competition be in any 
way affected--it has been impervious to competition--is the 
video services market. It has been 20 years since we had the 
Cable Act. In that 20 years, there has not been a single 
movement to have affective transformative competition in the 
video services market. Since 1995, video/cable rates have 
increased by 80 percent since 1995. In the last 5 years, they 
have gone up 40 percent. That is three times the Consumer Price 
Index. And, unfortunately, the trend continues. In 2005, there 
have been more increases.
    This is why this legislation is important--the legislation 
as proposed. And I would also say it is also reflected in the 
Blackburn-Wynn and in the Boucher-Stearns bill. It all reflects 
that reality of marketplace experience and the importance of 
seeing to ease of entry of new competitors and without the 
burden of legacy regulation.
    SBC today is in the process of adding to its broadband 
network. We are going to spend $5 billion over the next 3 years 
to expand our broadband capability. We are going to do so to 
offer a number of applications. But, in particular, we will 
compete with the entrenched cable TV operators in our 
territory. The legislation is important to encourage that. We 
particularly think it is important in that it provides our 
right to enter that market on precisely the same set of rules 
that cable had when they came into telephony, namely without 
the burden of the legacy regulations.
    We thank the committee staff, the members for their work on 
this important piece of legislation. We hope you act promptly 
on the legislation. Thank you.
    [The prepared statement of James D. Ellis follows:]
 Prepared Statement of James D. Ellis, Senior Executive Vice President 
              and General Counsel, SBC Communications Inc.
    Good morning. Thank you, Chairman Upton, and members of the 
committee for offering me the opportunity to speak with you today about 
the committee's draft reform bill. My name is Jim Ellis, Senior 
Executive Vice President and General Counsel for SBC Communications 
Inc.
    Two benefits of the bill stand out. First, the bill would establish 
a single, nationwide policy for the provision of broadband services, 
including VoIP. Second, the bill would tackle the issue of the extent 
to which cable franchise regulation, designed for the incumbent cable 
operators when they entered the market as monopolists, should apply to 
next-generation video services. By eliminating legacy franchise 
regulation for these broadband providers, the bill would create 
incentives for broadband investment, innovation and competition.
    It is with respect to this critical issue of video competition 
where further illumination is particularly warranted. SBC is making 
massive investments to continue its transformation from a local phone 
company to a global provider of advanced network capabilities and 
innovative services. A critical part of that transformation is SBC's 
entry into the video services market. Over a powerful new upgrade to 
its broadband networks, SBC will begin offering a next-generation video 
service that relies on Internet Protocol or ``IP''--the language of the 
Internet--and that will compete directly with, and we believe 
outperform, existing cable services. In doing so, SBC will not only 
offer consumers something they do not have today--a truly potent 
alternative to the cable incumbents--but also greater access to the 
newest in broadband technologies and services.
    Such an enterprise is not without substantial risk. Accordingly, 
any progressive legal regime should not impose on SBC and other new 
entrants legacy franchise rules designed for cable incumbents when they 
entered the market as monopolists. Doing so would utterly suffocate 
this much needed competition. Instead, the model should be cable's 
entry into the voice market using IP technology--known as ``VoIP.'' 
There, cable faces none of the pervasive legacy regulation imposed on 
traditional voice service providers like SBC. As a result, cable VoIP 
is thriving and poised to become a mighty competitive force.
    As we sit here, SBC engineers and construction crews are building a 
new addition to SBC's extensive broadband networks. We call this 
Project Lightspeed. It is a $5 billion capital project that will drive 
40,000 miles of additional fiber into SBC's networks and result in an 
advanced, broadband network that relies on IP technology. Over it, SBC 
will offer an integrated suite of voice, Internet access, data and 
video services. In just its initial phase, Project Lightspeed will 
extend to approximately 18 million households. This is the fastest and 
most aggressive deployment plan of its kind.
    One of the next-generation products that SBC will offer is an 
interactive, two-way, IP-based video service that will be unlike--and 
better than--the cable services available today. SBC's network will 
not, as cable systems do today, simply broadcast hundreds of channels 
to each customer's home for descrambling in a set-top box. Rather, SBC 
will give customers unprecedented control over the way they watch TV. 
This will mean three things to the consumer:

 First, the ability to interact in real time with the system to 
        control the viewing experience. Subscribers will, for instance, 
        eventually be able to watch a baseball game from multiple 
        camera angles or watch several games live on the same screen. 
        Or, the customer will be able to pause live TV, skip to more 
        detailed information about the product being advertised at that 
        moment, and then pick up the program where she left off.
 Second, integration of the video experience with other services. 
        Because the video service will communicate with other IP-based 
        services, customers will be able to display on the TV secure, 
        customized Internet content, such as real-time stock quotes or 
        sports statistics, or display on the family's dedicated TV 
        channel digital photos stored with SBC's Internet access 
        service.
 Third, control over the video service, not just with a remote 
        control, but with other IP-based devices. For example, Project 
        Lightspeed will eventually allow a customer, while away from 
        the house, to use a mobile phone to alter parental controls, or 
        tell the system to record a favorite show.
    In short, this is not plain-old-cable. It is a game-changing 
alternative to traditional cable service, and comes at a time when 
choice is much needed in the video marketplace.
    More than twenty years after the Cable Act, and notwithstanding the 
introduction of Direct Broadcast Satellite or ``DBS'' service, the 
video distribution market has yet to witness transformative 
competition. Cable prices have been rising over three times as fast as 
the Consumer Price Index (``CPI'').1 And that trend 
continues: 2005 has already seen another round of price 
hikes.2
---------------------------------------------------------------------------
    \1\ U.S. General Accounting Office, Report to the Chairman, Comm. 
on Commerce, Science, and Transportation, U.S. Senate: 
Telecommunications, Issues Related to Competition and Subscriber Rates 
in the Cable Television Industry, at 20 (Oct. 2003), available at 
http://frwebgate.access.gpo.gov/cgi-bin/
useftp.cgi?IPaddress=162.140.64.21&filename =d048.pdf&directory=/diskb/
wais/data/gao (``2003 GAO Report'') (finding that cable rates have 
increased approximately 40 percent over a five-year period compared to 
the approximately 12 percent increase in the Consumer Price Index).
    \2\ See, e.g., Tony Gnoffo, Dissecting Comcast's Rate Hikes, 
Philadelphia Inquirer, Mar. 13, 2005, available at 2005 WLNR 3875285 
(discussing rate hike taking effect in March and noting ``[f]or 
Comcast's customers, rate increases have become an annual affair. Their 
regularity and steep trajectory--about 6 percent a year since 2001--
have been a sore point.''); Charter to Increase Some Rates Starting 
Next Month, Kalamazoo Gazette, Feb. 11, 2005, available at http://
www.mlive.com/news/kzgazette/index.ssf?/base/news-12/
1108138819196880.xml; Greg Edwards, Comcast Raising Cable Rates, 
Richmond Times-Dispatch, Dec. 7, 2004 (Comcast has announced rate 
increases for its Richmond customers ranging from 5.9% to 9.9% for 
standard analog service); Peter J. Howe, Comcast Will Raise Cable Rates 
in January, Boston Globe, Nov. 24, 2004; Carolyn Said, Comcast to Raise 
Prices by 6 Percent Jan. 1, San Francisco Chronicle, Nov. 25, 2004; 
John Cook, Comcast Plans to Raise Cable TV Rates, Seattle Post 
Intelligencer, Nov. 24, 2004.
---------------------------------------------------------------------------
    It does not have to remain this way. In 2003, the GAO found that 
the rates of cable incumbents facing competition from a wire-based 
video provider are approximately 15 percent lower than in the absence 
of such competition.3 A 2004 GAO report similarly found that 
the entry of a broadband service provider offering video service 
``induce[s] incumbent cable operators to respond by providing more and 
better services and by reducing rates and offering special deals.'' 
4
---------------------------------------------------------------------------
    \3\ 2003 GAO Report at 3, 10. Accord, Video Choice Act of 2005, S. 
1349, 109th Cong., 1st Sess.  2(3) (2005) (citing GAO finding).
    \4\ U.S. General Accounting Office, Report to the Subcomm. on 
Antitrust, Competition Policy, and Consumer Rights, Comm. on the 
Judiciary, U.S. Senate: Telecommunications, Wire-Based Competition 
Benefited Consumers in Selected Markets, at 12 (Feb. 2004); see also 
id. at 15 (finding that ``the monthly rate for cable television service 
was 41 percent lower compared with the matched market, and in 2 other 
[broadband service provider] locations, cable rates were more than 30 
percent lower when compared with their matched markets'').
---------------------------------------------------------------------------
    SBC's Project Lightspeed is exactly the kind of wire-based 
competition that--according to the GAO and, frankly, common sense--will 
finally and truly challenge the chokehold that the incumbent cable 
operators have in this market.
    But entering the video services market to take head-on an 
entrenched, incumbent cable operator is a risky and costly enterprise--
even under the best of circumstances. It requires enormous investment, 
which SBC is making without the assurance of a single customer. It is 
critical, therefore, that laws and regulations designed to protect the 
incumbent cable provider do not so increase the risk and cost for new 
entrants that competition is stopped in its tracks. That is, SBC seeks 
for its IP-based video service the same treatment that the cable 
companies enjoy when rolling out IP-based voice services: Freedom from 
legacy regulation designed for incumbents.
    As I mentioned, SBC is not building a cable system or offering 
traditional cable service; thus, it is not subject to the existing 
cable franchise regulations in the Act. Nonetheless, it is clear that 
the incumbent cable operators will seek to impede our entry by doing 
whatever they can to ensure that we face additional, city-by-city 
franchise requirements. If they are successful, this nascent video 
competition may well be snuffed out. SBC would, for instance, have to 
negotiate some 2,000 separate franchise agreements--each of which would 
take an average of 12-18 months to obtain--in order just to complete 
its initial three-year deployment plan. And, the franchising 
obligations will differ from municipality to municipality, making it 
not only enormously expensive but also entirely impractical for SBC and 
other new entrants to build out region-wide networks. Having to meet 
these requirements will radically change the already challenging 
financial calculus in deploying these IP-based networks and services.
    Lawmakers and other policymakers can best foster what promises to 
be unprecedented competition in the video market by taking steps to 
ensure that IP-based competitors, and indeed new entrants in general, 
are not saddled with unnecessary and nefarious legacy cable franchise 
regulations.
    You are likely to hear claims that SBC wants to avoid cable 
franchise regulation so that it can serve just a select few customers. 
Don't believe this empty rhetoric. Our Project Lightspeed deployment, 
in just its initial phase, will reach millions of households in our 
territory--households that touch all different demographics. And, 
precisely because SBC is so serious about offering a robust alternative 
to cable, SBC is preparing to roll out an additional broadband video 
service called HomeZone. The service will for the first time integrate 
satellite video with powerful wire-based broadband capabilities. It 
will have many of the features of our IP-based video service and 
ultimately can be made available to every household in SBC's service 
territory that has access to our DSL service--that's some 80% of the 
households in our territory. SBC's goal is no less than to offer a 
broadband-based, next-generation alternative to cable across our 
territory.
    Please make no mistake about: Video policy is broadband policy. The 
economics of deploying next generation broadband networks like Project 
Lightspeed rest heavily on the ability to capture video revenues. 
Therefore, Project Lightspeed is a broadband story, as it will enable 
greater bandwidths and a host of services, not just IP video, over a 
single platform. With the U.S. lagging behind other industrialized 
countries in broadband deployment, consumers and communities can only 
benefit from the type of network investment that will be made possible 
by robust video competition. The stakes simply could not be higher.

    Mr. Upton. Thank you. Mr. Krause?

                     STATEMENT OF TIM KRAUSE

    Mr. Krause. Chairman Upton, Ranking Member Markey, and 
members of the subcommittee, thanks for the opportunity to 
appear here today regarding the BITS Act. Alcatel endorses this 
legislation and requests the committee move it forward in the 
legislative process without delay.
    Alcatel is also a member of the Telecommunications Industry 
Association, and Alcatel believes the bill was consistent with 
the TIA's convergence and broadband deployment policies. While 
Alcatel is a global company with 56,000 employees in 130 
countries, it actually has almost 9,000 here in North America 
and has made over $17 billion in technology investments here. 
The North American market is vital to Alcatel and the entire 
technology industry because it is here that consumers are most 
demanding. And as a result, this market leads the world in 
innovation. That is why Alcatel's global R&D centers for IP 
routing and enterprise applications are based in California, 
and our global R&D center for fiber to the home technologies 
are based in North Carolina. Alcatel's the leader in broadband 
access technologies with over 70 million digital subscriber 
lines shipped to service providers. Alcatel's been selected by 
SBC as its primary network infrastructure and video integration 
supplier for Project Lightspeed. It is also involved with 
numerous other telecommunications companies in the U.S. and 
around the world who are at various stages in their own plans 
to deploy broadband video services.
    The new broadband networks Alcatel will build for these 
companies are not mere conjecture. They are reality. We have 
all read the statistics. The U.S. is not the world leader in 
broadband deployment, either in terms of penetration or 
bandwidth. We think by creating a legal framework for the 
continued emergence of IP-enabled services going forward, we 
have the chance to position this nation to leapfrog 
international competition creating, in fact, an export market 
for our innovation in the form of products and services. The 
BITS Act will help make this possible in several ways.
    First, it generally protects nascent broadband services of 
all kinds, voice, video, data, from regulation at the Federal, 
State and local level. Second, the bill extends these 
protections to specific services such as VoIP and broadband 
video services in a socially conscious manner. The legislation 
preserves important public policies such as protecting 
consumers privacy, guaranteeing E911 access, and maintaining 
video programming safeguards.
    The bill creates a streamlined Federal video franchise 
process for broadband video services that will ensure--that can 
be a key driver of continued broadband deployment immediately. 
The BITS Act achieves this goal while protecting the ability of 
municipalities to manage their local rights-of-way as well as 
the video franchise revenue streams they have come to rely on.
    The new broadband networks Alcatel is building are unique 
in the U.S. market. These networks will enable two-way video 
services that allow for unprecedented subscriber interactivity, 
including robust parental controls for kid-friendly services, 
increased ethnic content, and other personalized applications 
not possible over existing video services.
    Those who ask whether broadband video services as defined 
in this legislation being deployed by companies like SBC and 
others are truly distinct from cable TV, I ask you to recognize 
the answer is yes. MSO's are preparing to invest billions of 
dollars into their own networks in an effort to compete. If 
telecommunications carriers were simply rolling out cable TV, 
there would be no need for such an investment by the cable 
operators. It is this very type of facilities-based broadband 
competition that benefits consumers in both quality of service 
and in pricing.
    The BITS Act also includes important Internet neutrality 
principles. Alcatel fully supports their inclusion into this 
legislation as an important component of broadband consumer 
demand.
    Finally, I would like to take a moment to commend the 
bill's authors for being sure to protect the rights of 
municipalities to enter the broadband market when they 
determine such action is in the best interest of their local 
communities. As Congressman Boucher knows, Alcatel was the main 
vendor to municipal fiber to the home building Bristol, 
Virginia, and we continue to work with municipalities in an 
effort to help them achieve their broadband potential where 
needed.
    Mr. Chairman, Ranking Member Markey, members of the 
subcommittee, thank you for the opportunity to appear here 
today. I look forward to discussing the issues and answering 
any questions later.
    [The prepared statement of Tim Krause follows:]
 Prepared Statement of Tim Krause, Chief Marketing Officer and Senior 
     Vice President for Government Relations, Alcatel North America
    Chairman Upton, Ranking Member Markey, Members of the Subcommittee. 
Good morning. My name is Tim Krause, and I am the Chief Marketing 
Officer and Senior Vice President for Government Relations of Alcatel 
North America.
    Thank you for the opportunity to appear before you today regarding 
the Broadband Internet Transmission Services Act. Alcatel endorses this 
legislation, and requests the committee move it forward in the 
legislative process without delay. Alcatel is also a member of the 
Telecommunications Industry Association, and Alcatel believes the bill 
is consistent with TIA's convergence and broadband deployment policies.
    The BITS Act will ensure the continued growth of the U.S. broadband 
market by creating legal and regulatory certainty for the services that 
flow over powerful new broadband networks. The result will be the 
continued introduction of Internet-based substitutes for traditional 
communications services by facilities-based and Internet-based 
providers alike, including converged triple-play offerings of voice, 
video, and data across traditionally distinct communications platforms.
    Alcatel is a global company with operations in 130 countries, 2004 
revenues of 12.3 billion Euros; and worldwide employees totaling 
56,000. Alcatel has made over $17 billion in technology investments in 
North America. We have 8,800 employees in North America, and dedicate 
more than 20% of our North American revenue to research and development 
that we conduct in North America--a higher percentage than we reinvest 
worldwide. Our global R&D centers for IP routing and enterprise 
applications are based in California, and our global R&D center for 
fiber to the home technologies is based in North Carolina. Alcatel's 
customers include traditional phone companies, mobile carriers, private 
and public enterprises, transportation networks, and satellite 
operators.
    The North American market is vital to Alcatel and the entire 
technology industry, because it is here that consumers are the most 
demanding, and as a result, this market leads the world in innovation. 
The legal and regulatory clarity that the BITS Act will provide will 
strengthen those qualities in the North American market, and better 
enable the manufacturing industry to compete in the face of the 
commoditization of products from low cost countries, and export new 
broadband innovations developed here at home abroad.
    Alcatel is the worldwide and North American leader in broadband 
access technologies, with over 70 million digital subscriber lines 
shipped to service providers. Alcatel has also been selected by SBC as 
its primary network infrastructure and services supplier for Project 
Lightspeed, which will deliver integrated IP Television and other 
ultra-high-speed broadband services to 18 million households by mid 
2008. Alcatel will enable SBC to provide this suite of services by 
building fiber deeper into the SBC network--using shorter copper 
subloops in existing neighborhoods and building fiber all the way to 
the premises in new housing developments. Equally as important, Alcatel 
will enable SBC to deliver multiple services with high quality over a 
single pipe to each home by leveraging the IP technologies it has 
developed.
    The new broadband network Alcatel is building for SBC is not mere 
conjecture, but a reality. Alcatel is already deploying such networks 
in countries across the globe, and that is why the BITS Act is critical 
for the future of communications in our nation. We have all read the 
statistics--the U.S. is not the world leader in broadband deployment, 
either in terms of penetration or bandwidth. Other nations have adopted 
policies that make broadband deployment a national commitment, while 
here at home the broadband market has been mired in almost a decade of 
legal and regulatory arbitrage that has held us back from reaching our 
full potential. By building on the gains of the Triennial Review and 
creating a legal framework for the continued emergence of IP-enabled 
services going forward, we can position our nation to leapfrog the 
international competition.
    The BITS Act will help make this possible in several ways:
    First and foremost, it establishes that broadband services of all 
kinds--voice, video, and data--are interstate in nature and not subject 
to onerous new regulations at the Federal, State, and Local level 
outside the confines of the bill itself. This is critical for 
establishing the certainty needed by facilities-based broadband service 
providers as well as Internet-based broadband service providers to take 
the financial risks of innovation in new services.
    Second, the bill extends those protections to specific broadband 
services that are replacing traditional services, such as VoIP and 
Broadband Video Services, but in a socially responsible manner that 
preserves long standing policies, such as protecting consumer privacy, 
ensuring consumers have access to dependable E911 service, as well as 
video programming safeguards.
    Most critically from Alcatel's perspective, the bill creates a 
streamlined Federal video franchise process for broadband video 
services. By protecting the ability of municipalities to manage their 
local rights of way, as well as the revenue streams they have come to 
rely on from video service providers, yet ensuring broadband video 
services can be deployed without delay, the BITS Act ensures that 
broadband video services can be a key driver of continued broadband 
deployment unlike anything we have seen in the U.S. to date.
    The new broadband network Alcatel is building for SBC is truly 
unique to the U.S. market, and in terms of its broadband video service 
capabilities it is most definitely not cable TV. SBC's broadband video 
service will be a two-way, interactive service that allows for 
unprecedented subscriber interaction with the service through the 
network. This interactivity enables features such as subscriber-
programmed channels, with content such as home movies or photo albums, 
for instance, that can be made available to other subscribers. 
Subscribers watching sports programming will have access to numerous 
camera angles, data integrated from the Internet, and an unprecedented 
HD experience.
    The benefits of the two-way interactive network Alcatel is building 
for SBC hardly stop there. Parents will have unprecedented capabilities 
to monitor and control the content to which their children have access 
in a user-friendly environment. Subscribers of all backgrounds can have 
access to content that suits their tastes and interests, whether that 
is Spanish language programming and content, or other ethno-centric 
programming and services. Additionally, the powerful two-way, 
interactive network can deliver on the long-standing promise of 
telemedicine by making interactive healthcare a reality, and be equally 
as effective in the classroom.
    Utilizing IP technology to offer a broadband video service ensures 
that capacity for each subscriber is maximized, utilizing only that 
capacity needed to deliver the specific programming being viewed by a 
subscriber. This eliminates capacity challenges familiar with cable 
television services. In practical terms, once constructed, SBC could 
use its new broadband network to offer to its subscribers every single 
broadcast channel, if it chooses, in analog and digital, including all 
multicast digital channels. There is no lost opportunity cost for SBC 
in doing so, because it has essentially unlimited capacity to offer 
video programming over its new network.
    To those who openly question whether broadband video services as 
defined in this legislation are truly distinct from cable TV, I urge 
you to recognize the answer is an emphatic ``yes!''
    One need only look at what the cable industry is doing in response 
to the investments being made by companies like SBC and Verizon. Our 
review of current MSO strategies indicates they are preparing to invest 
billions of dollars into their own networks in an effort to compete 
with the powerful broadband networks SBC and Verizon are deploying. If 
SBC and Verizon were simply rolling out cable TV, there would be no 
need for such investments by cable operators. It is this very type of 
facilities-based broadband competition that benefits consumers in both 
quality of service and in pricing.
    The BITS Act also includes important Internet Neutrality 
principles, which prohibit any service provider from denying 
subscribers access to lawful content available on the Internet, or from 
connecting devices to their broadband connections. The concept of 
Internet Neutrality, or ``connectivity principles,'' has long been 
advocated by the high tech community, and Alcatel fully supports their 
inclusion into this legislation. As a result, consumers accessing these 
new high-powered broadband networks will continue to be free to access 
the Internet-based content of their choosing. As broadband connections 
to the public Internet continue to increase in bandwidth, consumers 
will be increasingly empowered to watch video from alternative sources 
over the Internet if they so choose, or access any other Internet-based 
substitute for facilities-based broadband services they so desire.
    Finally, I would like to take a moment to commend the bill's 
authors for being sure to protect the rights of municipalities to enter 
the broadband market when they determine such action is in the best 
interest of their local communities. As Congressman Boucher knows, 
Alcatel was the main vendor to a municipal build in Bristol, Virginia, 
and we continue to work with municipalities in an effort to help them 
achieve their broadband potential where needed.
    Mr. Chairman, Ranking Member Markey, Members of the Subcommittee, 
thank you again for the opportunity to appear before you today. I look 
forward to discussing these issues and answering any questions you may 
have.

    Mr. Upton. Thank you. Mr. Mitchell?

                   STATEMENT OF PAUL MITCHELL

    Mr. Mitchell. Chairman Upton, and Ranking Member Markey, 
and members of the subcommittee, I am very pleased today to 
testify on this far-reaching legislation. When I testified 
before the subcommittee earlier this year, I focused on how 
Internet technologies are transforming the consumer experience, 
especially in the area of broadband platforms delivering video 
and other advanced services.
    This hearing is important because it takes us from the big 
picture to the critically important details. How will the 
legislation encourage all players in the Internet world, 
network operators and content providers alike, to deliver 
advanced Internet content and services to consumers. In this 
area, I have two overarching observations.
    First, we are concerned that the definitions in the 
discussion draft could extend regulation to Internet services 
that have never before been regulated. And second, although the 
draft includes a section on net neutrality or connectivity 
principles, and we commend you for that, we are concerned that 
it does not give adequate assurance to consumers and to 
Internet content and service providers, that the marketplace, 
instead of Internet broadband access providers, will decide 
what content and services succeed or fail on the Internet.
    This concept of connectivity principles or net neutrality 
is not new, and it is the concept that helped fuel the 
Internet's growth to the benefit of network operators, content 
providers and the public. It is not broken and doesn't need to 
be fixed, but it needs to be maintained in the broadband era. 
As you now, Microsoft provides a wide array of current and 
next-generation Internet offerings, including MSN for news and 
entertainment, Hotmail for free email, and our Live Meeting 
service which enables businesses to communicate more 
effectively, and for gamers we have Xbox Live connecting gamers 
around the world when they play Xbox games.
    My group develops the technologies for the delivery of 
video content. Microsoft TV Foundation Edition is currently 
being deployed by Comcast in Washington State, and we also 
developed the IP-based TV platform products that SBC will soon 
deploy as part of Project Lightspeed, and that Verizon recently 
launched in Keller, Texas.
    Network operators are investing in infrastructure for the 
broadband future, but Microsoft and other Internet companies, 
like Amazon.com, eBay, Google, Interactive Corp., and Yahoo, 
are also investing billions to bring content and services to 
the public, and telecommunications carriers will be paid some 
of that money, too. These investments by companies on the ends 
of the network matter because consumers do not buy technology 
advances; they buy content and services. Congress should 
therefore adopt policies that encourage Internet content 
providers and service providers to bring new and evolving 
offerings to the public.
    In my earlier testimony, I set out goals that should guide 
any legislation to promote broadband Internet access and 
content, and they are as follows: the Internet services and 
products should remain largely unregulated; consumers should be 
able to access any Internet site and use lawful application, 
devices or content with broadband connections; and where they 
are subject to regulation, Internet and video services should 
be subject to exclusively--to Federal regulation.
    So looking at the staff draft, how does it stack up against 
these goals? First we recognize that what you are trying to do 
is incredibly difficult. We appreciate the complexity of these 
issues. But now, since many seem to agree that Internet 
services should remain largely unregulated, we believe that the 
definitions in the discussion draft reach broader than 
necessary. Services and products that ride the top broadband 
transport networks have never been subject to regulation 
before. In the definition of BITS, however, the discussion 
draft could be interpreted to extend regulations to Internet 
services such as MSN, Hotmail or Yahoo. These services have not 
been subject to regulation because they do not provide 
transport connection to consumers. We suggest the subcommittee 
revise the BITS definition to apply only to entities that 
provide or resell facilities for accessing content and services 
on the Internet.
    We are also concerned that the definition of VoIP is 
broader than necessary. Click-to-call features which enable an 
outgoing call with a mouse click on a web page could be covered 
by the definition even though they are not substitutes for 
phone service, and they are really only one-way services. 
Likewise, Xbox Live could be covered by the definition even 
though it is not a substitute for telephone service either. We 
see no reason, and we think consumers see no reason, why Xbox 
Live or Live Meeting--which is a product to enable virtual 
office meetings--should have to offer E911 capabilities or 
shoulder other telephone-like burdens since they only provide 
voice services in a contained environment. Instead, we suggest 
that the VoIP definition should cover only those services that 
are genuine substitutes for traditional phone service, such as 
those using phone numbers and offering interconnected services 
for sending and receiving calls to and from the public switch 
telephone network.
    Finally, the concept of net neutrality or connectivity 
principles should remain a core value in the broadband Internet 
world. The consumers' ability to access any lawful content over 
dialup connections motivated Internet companies to invest, 
innovate, and compete in the Internet marketplace to the 
benefit of everyone. These principles give consumers, not 
network operators, the power to determine which services and 
products will succeed or fail. These enabling freedoms need to 
be maintained.
    We suggest two important improvements to the draft in this 
area. First, to ``preserved authorities'' language is ambiguous 
or overly broad and needs tightening in order to give the 
market adequate assurance. And, second, we believe the section 
on connectivity principles should apply to entities that 
provide or resell facilities for the transport of information 
and that provide a subscriber with Internet access or content 
derived from the Internet. The current definitions and 
provisions suggest that a company can both provide content from 
the Internet and not adhere to the connectivity principles. A 
company, of course, can choose to not include Internet content, 
in which case we think the connectivity principles should not 
apply.
    Thank you for the opportunity to appear again. You are 
undertaking important reforms, and I appreciate the opportunity 
to work with you on this legislation. I am happy to take your 
questions.
    [The prepared statement of Paul Mitchell follows:]
   Prepared Statement of Paul Mitchell, Senior Director and Chief of 
          Staff, Microsoft TV Division, Microsoft Corporation
    Chairman Upton, Ranking Member Markey, and Members of the 
Subcommittee: My name is Paul Mitchell, and I am Senior Director and 
General Manager for the Microsoft TV Division at Microsoft Corporation. 
When I testified before the Subcommittee earlier this year, my 
statement focused on how current Internet technologies are transforming 
the consumer experience, especially in the area of broadband platforms 
being used to deliver video and other advanced services using IPTV 
technology. I explained how IP services and products today enable the 
delivery of voice, data, and video in new and innovative ways and 
represent a remarkable change in the history of how consumers 
communicate and access video and data information.
    Today's hearing moves us from the big picture to the critically 
important details: how proposed legislation would promote or impede 
broadband deployment and the continued growth of Internet content and 
services in America. In short, how can legislative levers be used to 
promote continued investment in Internet content and services and 
enhance consumer benefit from these tremendous IP services and 
products.
    I will elaborate further but I have two overarching observations: 
First, the definitions in the bill could extend regulation to Internet 
services that have never been regulated before. Lest this Congress run 
the risk of impeding innovation by regulating new services, we suggest 
that the definitions need to be revisited. Second, the policy of ``net 
neutrality''--or the Connectivity Principles as Microsoft prefers to 
call them--has served consumers, content providers, and network 
operators exceedingly well over the past decade. These principles 
provide the certainty necessary for Internet companies to invest 
billions of dollars in new and innovative services and products which 
have added value to the underlying network. It also leaves it to the 
consumer in the marketplace to determine what services and products 
will succeed or fail. This policy is one of the fundamental reasons why 
the Internet has become what it is today. It does not need to be fixed. 
It only needs to be maintained in the broadband world.
               role of microsoft in ip-enabled services.
    Microsoft, as a technology provider, plays an important role for 
network providers and consumers alike as IP-based technologies and 
features are made available via a great diversity of devices, including 
PCs, TVs, mobile phones, and handheld devices. In our world, Internet 
or IP services and products generally mean those services and products 
that ride atop of or are connected to broadband transport networks. To 
name just a few examples, our MSN division delivers to computers, 
wireless phones, and handheld devices a variety of content, including 
news and entertainment, as well as other services such as downloadable 
music and video clips. In addition, consumers can sign up for Hotmail, 
a free email service, and MSN Messenger, a free instant messaging 
product. Our Live Meeting service enables a group of people in an 
enterprise environment or other setting to enjoy new options for real-
time collaboration. Small groups and enormous groups can simultaneously 
talk among themselves, and either create or view a Power Point 
presentation, while the participants never leave their offices. This 
service increases worker productivity, using Microsoft software, 
broadband transport connections, and standard telephone connections. 
Our Xbox Live Service offers another example of how IP technology can 
be used to improve a consumer experience, in this case gaming, by 
allowing gamers to compete against each other over the Internet and 
enhance their gaming experience by talking to each other via a VoIP 
feature.
    My group, Microsoft TV, offers technology solutions to 
infrastructure and content providers. We developed the Microsoft TV 
Foundation Edition, which is currently being deployed by Comcast here 
in the U.S. It brings advanced programming-guide functionality, along 
with digital video recording (DVR) and a client applications platform 
to traditional cable networks. We also developed the IP-based TV 
platform products that SBC will soon deploy and that Verizon recently 
launched in Keller, Texas. These products enable delivery of a high-
quality interactive video content service to consumers via the new 
facilities being deployed by these traditional telephone companies. The 
Microsoft TV products can be deployed over a variety of networks 
including a broadband cable, DSL, or even wireless networks. They will 
offer new interactive features for consumers, and we think consumers 
will find they create a very compelling experience.
    VoIP--which refers to the delivery of voice over an IP based 
platform--is an important development on the Internet. Microsoft plays 
a role in advancing this technology, too. VoIP is a technology that can 
be used in a variety of ways and presents a definitional challenge for 
policy makers. VoIP encompasses a great range of capabilities--from a 
feature in a gaming console such as Xbox, to a computer-to-computer 
communication, to a full blown VoIP telephone service that is capable 
of interconnecting with the PSTN and terminating calls to any telephone 
on the planet.
    As this Subcommittee considers the appropriate regulatory treatment 
for those VoIP services that are offered as a substitute for consumers' 
traditional phone services--what you might call a VoIP Telephony 
service--it must ensure that other VoIP offerings or capabilities are 
not swept inadvertently into the mix. For instance, no one sees the 
VoIP feature that can be used with our Xbox Live gaming service as a 
substitute for their landline phone. The Xbox Live VoIP feature does 
not use telephone numbers, cannot be used in conjunction with a phone, 
cannot connect to the PSTN; it can only be used if you have an Xbox 
game console, and users are identified solely by their gamer tags and 
not their names. In short, the Xbox Live VoIP feature is simply too 
limited to be of use to consumers as a substitute for their existing 
telephone service. There is no sound policy basis for regulating Xbox 
Live like a telephone. No one is going to stop using plain old 
telephone service because they've become an Xbox Live gamer.
                  core principles to guide legislation
    The Subcommittee will no doubt hear today about the tremendous 
investments made by the network operators to promote broadband, and 
they should be commended for that commitment to the future. But the 
network operators are not alone in spending billions of dollars to 
deliver content and services to broadband Internet consumers. Microsoft 
and other Internet companies, such as Amazon.com, eBay, Google, 
Interactive Corp., Yahoo! and others, have also made billions of 
dollars of investments to make broadband Internet content, services, 
and products available to consumers and businesses, and some of that 
money is paid directly to telecommunications carriers. In the current 
calendar year, Microsoft alone is likely to spend over $7 billion on 
research and development--an amount that has gone up by an additional 
billion dollars every several years over the course of our recent 
history.
    This fact is sometimes lost in this debate, but it bears 
remembering that consumers and businesses buy content and services made 
available by Internet companies, not just technologies. Consequently, 
we recommend policies that also encourage Internet content and service 
companies, as well as technology companies, to make the necessary 
investments for the broadband Internet future.
    When I testified earlier this year, I suggested four goals that 
should guide any legislative effort to promote broadband use and the 
future of the Internet. Let me briefly summarize those four goals:
1. Internet-based services and products should remain largely 
        unregulated.
    Internet-based services, that is, those services and products that 
ride atop or connect to the underlying broadband transport services, 
should remain largely unregulated and not be subject to the 
Communications Act. The success of the Internet as a tool for consumers 
and business has been remarkable, and Congress should proceed carefully 
so it does not inadvertently disturb this accomplishment. The choice of 
content and services available over the Internet is awe inspiring, and 
that stands out as a huge accomplishment of this medium. Thus, Congress 
should ask whether any proposed law or regulation that touches upon 
Internet services and products is necessary for the public good.
2. Consumers should be able to access any Internet site and use any 
        lawful application or device with a broadband Internet 
        connection--just as they have been able to do in the narrowband 
        world.
    This principle, which sometimes is referred to as ``net 
neutrality'' or ``Connectivity Principles,'' is really about letting 
consumers decide, and not network operators, what content and services 
succeed or fail on the Internet. Connectivity Principles are important 
as a policy matter because they determine whether consumers in the 
marketplace drive decisions on innovation and technology, or whether 
one lets the network operators steer those decisions. We are pleased 
that the network operators are investing in technology and innovation, 
and we are proud partners with them in offering content and services to 
the public. We just think that other companies should continue to be 
able to offer Internet content and services as well.
    In August of this year, the FCC adopted a Policy Statement 
endorsing the spirit and goals of the Connectivity Principles that 
several core Internet companies--Amazon.com, eBay, Google, Interactive 
Corp., Microsoft, Yahoo! and others--have long endorsed. Last week, the 
FCC voted unanimously to require SBC and Verizon to adhere to them, at 
least for two years. These principles have defined the Internet since 
it was launched. Specifically, they are:

 Freedom to Access Content. Consumers should have access to their 
        choice of legal content.
 Freedom to Use Applications. Consumers should be able to run 
        applications of their choice.
 Freedom to Attach Personal Devices. Consumers should be permitted to 
        attach any devices they choose to the connection in their 
        homes.1
---------------------------------------------------------------------------
    \1\ FCC Policy Statement (Aug. 5, 2005); SBC-AT&T and Verizon-MCI 
Merger Approvals (Oct. 31, 2005).
---------------------------------------------------------------------------
    These hallmarks of consumer expectations have been, and remain, 
fundamental to the success of the Internet. Those basic features 
defined consumer and company experiences on the Internet, and we agree 
with others in the industry that these principles should be carried 
forward to the Internet broadband future.
3. If policy makers act, they should maintain a ``light touch'' and act 
        only with respect to those services that give rise to present 
        day policy questions.
    In order to avoid constraining the continued growth of IP services, 
any regulation imposed on IP services should be done with a light touch 
and only where there is a policy issue that needs to be addressed. For 
example VOIP is a technology that can be used in a variety of ways. To 
the extent policy makers are seeking to address a policy objective, 
they should not focus on all VOIP technologies. Instead they should 
focus only on those that present a policy question. If policy makers 
seek to preserve E911, we would suggest that they need not look at 
implementing E911 in the Xbox Live Service but instead may want to 
explore those VOIP services that are substitutes for existing telephone 
service. The principle to maintain is that, to the extent regulation is 
needed, policy makers should act with the lightest touch necessary to 
solve their policy objective in order to provide as much latitude for 
the continued innovation and growth of Internet services as possible.
4. Where subject to regulation, Internet and video services should be 
        subject exclusively to Federal jurisdiction.
    Congress should protect IP services and all video and broadband 
companies from conflicting and overlapping State and local regulation. 
These services are used as an integral part of interstate commerce, 
they utilize interstate or global networks, and they generally require 
the transmission of data and information across state lines. As a 
consequence, where subject to regulation, they should be exclusively 
within Federal jurisdiction. The FCC has correctly decided that VoIP is 
an interstate service, and that conclusion should apply to other IP-
based services that are subjected to regulatory treatment, as well as 
to multichannel video programming services more generally.
                       the staff discussion draft
    To focus our comments on the 70-page draft bill, I will address how 
the Discussion Draft responds to each of the four goals we see for any 
legislation. For purposes of today's testimony, I will comment on the 
weightiest issues. However, I am hoping my Microsoft colleagues will 
have the opportunity for broader conversations with the staff about 
narrower changes to the draft.
1. Internet services and products should remain largely unregulated.
    The keystone of the draft legislation is found in the definitions, 
and we are concerned that in some places they sweep broader than 
necessary. Under current law, services and products that ride atop of 
or are connected to broadband transport networks have not been subject 
to regulation, while the underlying transport layer has been regulated 
for access, interconnection, intercarrier compensation, and other 
purposes. The Discussion Draft, specifically the definition of BITS, 
could be interpreted to extend regulations to Internet services, such 
as MSN, Hotmail, Google Mail, E*Trade, or Yahoo!. These services have 
never been subject to regulation because they do not involve transport 
of information and are simply destinations on, or information services 
made available via, the Internet. In addition, we would suggest that 
these services do not pose public policy questions such as those that 
might be posed by a BITs service. As a result, we think they should 
continue to be unregulated. We urge the Subcommittee to maintain its 
focus on those entities that provide facilities directly to subscribers 
that enable the subscriber to transport information to or from the 
Internet. This formulation would enable important societal regulatory 
objectives to be met while not extending regulation to new areas of the 
Internet.
    The definition of VoIP also sweeps more broadly than necessary. 
Some companies that provide online customer service are beginning to 
make use of so-called ``click-to-call'' capabilities. For example, you 
can talk to an operator at LensExpress (a contact lens fulfillment 
company) via the company's 800 telephone service or via a one-way VoIP 
based call from your PC to the company's phone bank. If the call is 
completed via the PSTN, the Discussion Draft would treat that 
capability as a regulated offering, subject to 911 requirements, USF 
fees, consumer protection rules, and the like. Yet, that feature is not 
a substitute for traditional phone service--it is only one-way. It is 
not the intent of LensExpress to be considered the provider of a phone 
service. The company only wants to simplify its customer service--and 
yet that capability arguably would lead to LensExpress being covered by 
the bill. Over the longer term, because the bill gives the FCC 
discretion to expand the definition of VoIP service, the bill's 
provisions could be extended to the Xbox Live voice feature simply 
because Xbox Live uses an alternative ``identification method'' to 
create the voice connection between two Xbox gamers. In the area of 
VoIP, we urge the legislation apply only to those services that are a 
substitute for traditional voice service; that have a North American 
Numbering Plan number; that are interconnected with the PSTN; and that 
enable a user to send and receive calls to and from the public switched 
network. The 911 provision of the bill refers to these services as 
``send-and-receive'' services (at Section 204). We recommend that this 
concept be used to define the class of VoIP services subject to any 
regulation, lest Congress stymie the development of VoIP capabilities 
while those capabilities are still emerging.
2. Consumers should be able to access any Internet site and use any 
        lawful application or device with a broadband Internet 
        connection--just as they have been able to do in the narrowband 
        world.
    Section 104 of the Discussion Draft addresses the Connectivity 
Principles. As I stated above, the concept that consumers can access 
the content and services they want on the Internet without interference 
or permission from the network operator is not new. That concept of 
Connectivity Principles is even older than the Internet itself. In 
fact, you can argue that without these principles, the Internet would 
not have evolved as it has. If you consider the Internet a remarkable 
engine of innovation and growth, then you should credit in part 
Connectivity Principles for that result. We think that policy--letting 
consumers decide--has served consumers, content providers, and network 
operators exceedingly well over the past decade. That policy is not 
broken. It does not need to be fixed. It only needs to be maintained in 
the broadband Internet world.
    We have joined in the past with other leading Internet companies, 
including Amazon.com, eBay, Google, Interactive Corp., and Yahoo!, to 
advocate for the continuation of Connectivity Principles, and we are 
pleased that the issue has been considered in the Discussion Draft.
    Two comments: First, the policy embodied in Section 104 on 
Connectivity Principles is an important one and we commend you for 
including this concept in the Discussion Draft. However, the provisions 
in Section 104 need improvement in specific areas. The ``preserved 
authorities'' language is uncomfortably ambiguous in some parts and 
overly broad in others.
    Second, and this is the critical issue: What entities need to 
adhere to Section 104? The version of the Discussion Draft that we have 
reviewed states that only those persons which provide BITS need to 
follow the net neutrality requirements. Those entities that provide 
``Broadband Video Service,'' which includes ``information derived from 
the Internet,'' do not have to comply with the net neutrality 
requirements.
    Our view is that if a BVS provider does include Internet content or 
access, then of course the Section 104 Internet freedoms should apply. 
Alternatively, if they do not include Internet content or information 
derived from the Internet, then the Internet freedoms should not apply.
    We have heard that part of the reason for excluding BVS providers 
from Section 104 stems from a concern for spam or viruses. Let me start 
by saying that we respectfully disagree with that claim as a technical 
matter. But more importantly, Section 104 contains clear language that 
enables a network operator to manage a network to ensure network 
security and reliability. Network management is an important function, 
but within the terms of Section 104, the network operators have the 
authority they need to guard against these possible problems. That is 
not an argument for exempting BVS providers that include Internet 
content from Section 104.
    In short, those entities that provide subscribers with Internet 
content or information derived from the Internet should adhere to the 
core principles of net neutrality found in Section 104, and those 
principles should be clarified to provide consumers and content 
providers with clear and unambiguous protections.
3. If policy makers act, they should maintain a ``light touch'' and act 
        only with respect to those services that give rise to present 
        day policy questions.
    As I explained above, we are concerned that the definitions of BITS 
and VOIP in the bill would extend regulation to Internet services that 
have never been regulated and that should remain unregulated because 
they ride atop the connection layer or they are not a substitute for 
traditional phone service. To illustrate: we do not see any reason why 
Xbox Live, a feature that enables persons playing a game to talk (well, 
``trash talk'' to use the technical term), should have to offer E911 
service. Similarly, we do not see why a collaborative work program, 
that enables users to review a document together and have a conference 
call to discuss it, should have E911 obligations. Or why Hotmail or MSN 
should have to register with all 50 states in order to continue to 
provide service. The changes to the definitions we recommend above 
would keep the focus on the activity that should be covered to achieve 
important societal objectives without going too far.
    I also want to address briefly the important issue of universal 
service funding. We recognize that the Discussion Draft refers this 
issue to the Commission, but we believe that the Commission should use 
a ``connections'' approach and not a numbers and other identifiers 
approach, nor the current system, in order to finance the USF system. A 
connections approach reduces arbitrage and captures all those persons 
who use the telecommunications infrastructure, and that is who should 
be contributing to its support.
4. Where subject to regulation, Internet and other video services 
        should be subject exclusively to Federal jurisdiction.
    We think that the current regime of having local and state 
governments license and regulate video distribution networks needs 
reform. The current system does not work for telephone companies trying 
to enter the business, and it does not work for cable companies already 
in the business. Both networks should not be subject to local and state 
regulation but should be covered by a federal regime. The same should 
apply to all Internet services. These are inherently interstate 
services that where regulated should be committed to the federal 
government for exclusive regulation. The Discussion Draft takes some 
steps in that direction, though it could be improved to ensure that 
cable companies today get out from under the burden of state and local 
regulation.
    Thank you for the opportunity to provide my views on this 
critically important legislative proposal. I look forward to your 
questions and to working with you and your staff going forward on these 
and other aspects of the draft.

    Mr. Upton. Thank you. Ms. Praisner?

                  STATEMENT OF MARILYN PRAISNER

    Ms. Praisner. Thank you.
    Mr. Upton. Oh.
    Ms. Praisner. Good morning, Chairman Upton, Mr. Markey, 
Chairman Barton, Mr. Dingell, and members of the committee. I 
especially want to thank my Congressman, Congressman Wynn, for 
his kind introduction and comments. I look forward to working--
continuing to work with you for our common constituents.
    For 3 decades, local governments have used cable 
franchising authority to achieve nearly universal deployment of 
broadband advance services, and to protect consumers within our 
authority. Let there be no mistake, local governments want 
competition as fast and as much as the market can sustain. 
While we do not believe that the local franchise process has 
impeded video competition, we have been prepared to explore 
different means of streamlining the process. However, we remain 
skeptical.
    Most recently in Texas, Telco's were given what they 
wanted, fast-track franchising, but Verizon and SBC have to-
date offered to provide competitive choice to less than 1 
percent of Texas households. Is the Nation giving up current 
consumer protections and community benefits just to provide 
choice to a small percentage of the population? We continue to 
be concerned, as I know you are, about the digital divide. 
Local governments have come to the table in search of a 
legislative compromise. We remain clear about our broad 
parameters: preserve universal service, E911 local emergency 
alerts, and the Nation's homeland security; protect our 
property rights and our authority for managing the Nation's 
rights-of-way. Private, for profit and quasi-permanent 
occupancy are the most valuable real estate held by local 
government must be fairly compensated, both through social 
obligations to the community served and in rental fees. 
Preserve local governments' right to provide broadband 
transport and communications services for itself and our 
constituents. Insure that a local Telco franchise is comparable 
in terms and conditions to a cable franchise. And provide for a 
consumer's choice of broadband providers with guaranteed 
network neutrality.
    Local government organization staffs met with your 
collective counsel to craft a solution. The fruits of those 
labors was the first staff draft, or BITS I. While not perfect, 
BITS I was a good start. It reflected a non-partisan dialog 
with all the parties at the table. It evidenced a respect for 
and agreement with many of the essential items I cited. We were 
invited to assist in strengthening those areas where local 
government believed the staff draft had missed the mark.
    The revised staff draft, BITS II, on the other hand, breaks 
faith with those deal points. The telephone companies, to us, 
appear to get everything they asked for including fast-track 
franchising while avoiding most social obligations. Public 
safety standards are determined by the industry without proper 
oversight. Local government is permitted only to enforce what 
the industry deems important. This is an inappropriate Federal 
and private industry intrusion into the management of our 
streets and sidewalks. State and local government is not kept 
whole.
    BITS II limits rights-of-way fees to the recovery of 
management costs. Broadband video franchise fees are limited to 
5 percent of subscriber revenue, not all video service-related 
revenues. So Telco's not only get out from under franchising, 
they get subsidized use of local governments' property. As a 
comparison, the Federal Government charges the full market 
price to use public spectrum.
    Community needs and interests are essentially abandoned. 
While cable must continue to provide local community needs and 
interests such as PEG I-Nets, and emergency alerts, the Telcos 
do not. Consumers lose choice and competition and there is no 
network neutrality. BITS would not even replicate the rental 
fees contained in the recent Texas franchising legislation. 
Needless to say, local government officials across the country 
are not pleased with the prospect of this bill moving forward 
as is.
    We welcome your introductory comments about the fact that 
this is a draft. We solicit the support of the bipartisan 
leadership and every member of this subcommittee for our 
efforts to protect your and our constituents. This bill, as it 
is currently worded, breaks faith with the promises we were 
made in exchange for our support for the national franchise 
solutions. We were promised consumer choice, fair competition, 
preservation of our rights-of-way authority, and keeping local 
governments whole. Without appropriate amendments, BITS II, as 
I said, breaks faith with those commitments and breaks faith 
with our consumers.
    We stand ready, Mr. Chairman and members of the committee, 
to continue to negotiate on appropriate legislation prior to 
markup. We will come back to the table this afternoon. We will 
stay and work with you through the Christmas recess if 
necessary to achieve the result that we all want: quality 
universal service for everyone, all consumers within our 
jurisdictions. Thank you very much.
    [The prepared statement of Hon. Marilyn Praisner follows:]
   Prepared Statement of Hon. Marilyn Praisner on Behalf of National 
   Association of Telecommunications Officers and Advisors, National 
    League of Cities, United States Conference of Mayors, National 
               Association of Counties, and TeleCommUnity
                            i. introduction
    Good Morning, Chairman Upton, Mr. Markey and Members of the 
Subcommittee, my name is Marilyn Praisner. I am a member of the County 
Council of Montgomery County, Maryland. I appear on behalf of the 
National Association of Telecommunications Officers and Advisors 
(``NATOA''), the National League of Cities (``NLC''), the United States 
Conference of Mayors (``USCM''), the National Association of Counties 
(``NACo'') and TeleCommunity.1
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    \1\ NLC, USCM and NACO collectively represent the interests of 
almost every municipal or county government in the U.S.. NATOA's 
members include telecommunications and cable officers who are on the 
front lines of communications policy development in hundreds of cities 
nationwide. TeleCommUnity is an alliance of local governments and their 
associations which are attempting to refocus attention in Washington on 
the principles of federalism and comity for local government interests 
in telecommunications. Councilmember Praisner is chairman of the 
Telecommunications and Technology Steering Committee for the National 
Association of Counties; Chair of the Executive Committee for SAFECOM; 
Chair of TeleCommUnity and Former Vice-Chair of Local State Government 
Advisory Committee to the FCC.
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                   ii. the role of cable franchising
    For three decades local governments have used cable franchising 
authority to achieve nearly universal deployment of broadband advanced 
services and to protect consumers to the extent we have authority. We 
also know that only wire line competition reduces cable rates 
2 and enhances service.3 Therefore, let there be 
no mistake, local governments want competition, as fast and as much as 
the market and some state laws will sustain.4
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    \2\ Please understand that local governments are under plenty of 
pressure every day to get these agreements in place and not just from 
the companies seeking to offer service. In separate studies both the 
FCC and GAO documented in markets where there is a wire-line based 
competitor to cable that cable rates were, on average, 15% lower. 
United States General Accounting Office, Telecommunications Issues in 
Providing Cable and Satellite Television Service, Report to the 
Subcommittee on Antitrust, Competition, and Business and Consumer 
Rights, Committee on the Judiciary, U.S. Senate, at 9, GAO-03-130 
(2002)(``GAO 2002 Study''), available at www.gao.gov/cgi-bin/
getrpt?GAO-03-130; In re Statistical Report on Average Rates for Basic 
Service, Cable Programming Service, and Equipment, Report On Cable 
Industry Prices, MM Docket No. 92-266, 17 FCC Rcd 6301, Table 6 
(2002)(``2002 Cost Report'').
    \3\ For over thirty years local governments have granted incumbent 
cable operators and competitive broadband providers non-exclusive 
franchises to use public property to provide cable service and non-
cable services. Grants of exclusive franchises, which were rare, were 
prohibited by the 1992 Cable Act. 47 U.S.C.  541(a)(1). New entrants 
and incumbent cable operators are using new and upgraded systems to 
offer bundled combinations of video programming, Internet access, and 
telephone service to increase per subscriber revenues.
    \4\ Many states have level playing field statutes, and even more 
cable franchises contain these provisions as contractual obligations on 
the local government. So when a new provider comes in and seeks a 
competitive cable franchise, there is not much to negotiate about. If 
the new competitor is seriously committed to providing as high a 
quality of service as the incumbent, the franchise negotiations will be 
neither complicated nor unreasonably time consuming. It is also 
important to recognize that every negotiation has two parties at the 
table. Some new entrants have proposed franchise agreements that 
violate the current state or federal law and open local franchise 
authorities to liability for unfair treatment of the incumbent cable 
operator vis-a-vis new providers. Some also seek waiver of police 
powers as a standard term of their agreement. Local government can no 
more waive its police powers to a private entity than the federal 
government can waive the constitutional rights its citizens.
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    In an effort to promote competitive cable offerings, in 1992, 
Congress amended 47 U.S.C. 541(a)(1) to ban the granting of exclusive 
cable franchises and imposed an affirmative obligation on franchising 
authorities to ``not unreasonably refuse to award an additional 
competitive franchise . . .'' 5 There have been very few 
cases filed pursuant to Section 621(a) 6, and even fewer of 
these claims have found fault with local franchise authority grants or 
refusals.7
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    \5\ See Subsec. (a)(1). Pub. L. 102-385,  7(a)(1))
    \6\ As of October 26, 2005, an electronic search of the Westlaw 
system reveals 13 published opinions which cite Section 541(a)(1). The 
13 published opinions represent 11 different controversies. Two of the 
controversies have trial court and appellate court opinions. Of the 11 
different cases;
     Two were brought against the US government acting as a cable 
operators on military bases (Americable International, Inc v. Dept of 
Navy, 129 F.3d 1271, (D.C. Cir. 1998) (Navy's refusal to grant a SMATV 
contract, does not rise to a  541(a)(1) violation.); Cox Cable Comm., 
Inc. v. United States, 992 F.2d 1178 (11th Cir.1993) (11th Circuit 
found a violation when Robins Air Force Base granted an exclusive cable 
franchise to Centerville Telecable, the winner of a competitive bidding 
process.);
     Four of the cases saw local government citing to the section as a 
justification for their actions. Twice local government has 
unsuccessfully cited Section 541(a)(1) as means to defeat exclusive 
franchises that pre-dated the Cable Act. (James Cable Partners v. City 
of Jamestown, 43 F. 3d 277 (6th Cir. 1995); Service Electric 
Cablevision v. City of Hazleton 2005 WL 2020452 (M.D.Pa. 2005). Once it 
was used to defend against a claim of favoring a competitor over an 
incumbent (Cable TV Fund v. City of Naperville and Ameritech New Media, 
Inc., 1997 WL 280692 (N.D. Ill., 1997) and once to demonstrate that the 
cable franchising process did afford due process standards. Liberty 
Cable v. The City of New York, 893 F.Supp 191 (S.D. New York, 1995)
     One case was brought against a private developer.
    While there are not a great many common threads in the Section 
541(a)(1) cases, there are two absolutes.
    A party must ask for a franchise before an LFA can be found to have 
unreasonably denied the grant of a second franchise. ``A natural 
reading of  541 requires that Houlton Cable apply for a second 
franchise before it can ask this Court to review whether it is 
reasonable to refuse one.'' NEPSK, Inc. v. Town of Houlton, 167 
F.Supp.2d 98, 102 (D.Me 2001) See also NEPSK, Inc. v. Town of Houlton 
283 F. 3d 1 (1st Cir., 2002); The requesting party must be asking for a 
new franchise and not a renewal. In I-Star Communications Corp. v. City 
of East Cleveland, 885 F.Supp. 1035 (N.D.Ohio 1995). the District Court 
for the Northern District of Ohio held that I-Star did not state a 
claim for relief pursuant to  541(a)(1) because the case concerned the 
City's efforts to revoke I-Star's existing franchise, not a denial of 
an application for a ``second competitive franchise.''
    \7\ In thirteen years, only twice has a local government LFA been 
found to violate or potentially violate Section 541(a)(1). In one case 
the violation was a matter of semantics and in the other the finding 
was procedural. In Qwest v. Boulder 151 F.Supp.2d 1236 (D. Colorado, 
2001) Qwest was providing cable programming in Boulder through a 
revocable permit granted by the city. In addition to Qwest, TCI was 
also providing cable in the city by means of a revocable permit, while 
Wild Open West, a third provider, was offering cable in the city by 
means of a franchise. Testimony was presented to explain that Qwest and 
TCI operated under a revocable permit rather than a franchise as the 
city's charter required a vote of populace for the issuance of a 
franchise. Wishing to avoid the expense of such an election, Qwest sued 
arguing that the election provision was preempted by  541(a)(1) and 
the Court agreed. In Classic Communications Inc. v, Rural Telephone Co, 
956 F.Supp. 896 (D. Kansas, 1996) Telecommunications company and its 
telephone and cable television subsidiaries brought suit for refusal to 
grant cable television franchises to cable television subsidiary. The 
Kansas District court denied the cities' motion to dismiss stating: 
whether the Cities' refusal was unreasonable is not an issue at this 
stage of the litigation.
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                    iii. is the 4th time the charm?
    Much like you, local governments have been gravely disappointed 
with the telephone industry's past promises-made versus reality-
delivered. Three times before, in 1984, 1992, 1996, the telephone 
industry promised Congress it would enter the video services business. 
Each time Congress amended the laws to permit the entry. Now they ask 
again.
    While local government will never agree that the local franchise 
process has impeded video competition, we are prepared to explore 
different means of streamlining the process.8 We are, 
however, skeptical.
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    \8\ Franchising is not a Barrier to Competition
    The concept of franchising is to manage and facilitate in an 
orderly and timely fashion the use of property. For local governments, 
this is true regardless of whether we are franchising for the provision 
of gas or electric service, or whether we are providing for multiple 
competing communications services--all of which use public property. As 
the franchisor--we have a fiduciary responsibility that we take 
seriously, and for which we are held accountable.
    Franchising is a National Framework with an Essential Local 
Component--Franchising is essentially a light touch national regulatory 
framework with local implementation. The 1992 Cable Act authorizes 
local governments to negotiate for a relatively limited range of 
obligations that are imposed upon cable operators. Virtually none of 
these obligations are mandatory. Each one is subject to decision-making 
at a local level.
    Local Franchising is Comparatively Efficient, and Must Be Fair to 
Protect All Competitors--Franchising is not intended to be complex or 
time-consuming, but fair to incumbent, competitor and consumers. In 
some communities, operators bring proposed agreements to the government 
based on either the existing incumbent's agreement or a request for 
proposals, and with little negotiation at all an agreement can be 
adopted. In other communities, where the elected officials have reason 
to do so, a community needs assessment is conducted to ascertain 
exactly what an acceptable proposal should include. Once that 
determination is made, it's up to the operator to demonstrate that they 
can provide the services needed over the course of the agreement.
    The Current Framework Safeguards Against Abuse and Protects 
Competition--The current framework ensures that all competitors face 
the same obligations and receive the same benefits, ensuring a fair 
playing field. Federal safeguards protect against abuse. Local 
government is generally prohibited from requiring a provider to use any 
particular technology or infrastructure such as demanding fiber or 
coaxial cable. They can require that certain minimum technical 
standards be adhered to and that systems are installed in a safe and 
efficient manner. Local government ensures compliance with the National 
Electric Safety Code to protect against threat of electrocution or 
other property damage. Local rules can also require that signal quality 
be up to federal standards, and that systems are maintained to provide 
subscribers with state of the art transmissions. Similarly, it is local 
government that inspects the physical plant and ensures compliance on 
all aspects of operations. We work closely with our federal partners 
and cable operators to ensure that cable signal leaks are quickly 
repaired before there is disruption or interference with air traffic 
safety or with other public safety uses of spectrum.
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    Most recently in Texas, telcos were given what they wanted, fast 
track franchises. But Verizon and SBC, months after the law was put on 
the books, have offered to provide competitive choice to less than one 
percent of Texas households. Is the nation giving up the consumer 
protections and community benefits in the current franchising system 
just to provide choice to one percent of the population?
                     iv. the solution on the table
    Local government came to the table in search of a legislative 
compromise and we remain clear about our broad parameters:

1. Universal service, E-911, local emergency alerts and the nation's 
        homeland security in an IP era must be preserved.
2. State and local governments' property rights and our authority for 
        managing the nation's rights-of-way must be kept whole. 
        Private, for-profit, and quasi-permanent occupancy of the most 
        valuable real estate held by government must be fairly 
        compensated--both through social obligations to the community 
        served and in rental fees.
3. Local governments must have the right to provide broadband transport 
        and communications services to themselves and to their 
        constituents to further important community interests.
4. The local telephone company franchise should be comparable to the 
        terms and conditions applied to their cable competitors.
5. Consumers need choice of broadband providers with guaranteed network 
        neutrality. The owner of the broadband pipe should never 
        discriminate among service providers nor limit the consumer's 
        access to those services.
                               iv. bits i
    The national local government organizations directed our staffs to 
meet with your collective counsel to craft a solution. The fruit of 
those labors was the first staff draft, or ``BITS I.''
    BITS I, while not perfect, was a good start.9 It 
reflected a non-partisan dialogue with all the impacted parties 
(federal, state, and local governments, industry and consumers) at the 
table. It evidenced a respect for and agreement with many of the 
essential elements outlined on the above issues. And, we were invited 
to assist in strengthening those areas where local government believed 
the staff had missed the mark.
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    \9\ A copy of the memo local government shared with the bi-partisan 
staff is attached hereto as Appendix A. The memo reflects that there 
was much to embrace in BITS I and most of local government's comments 
sought to perfect the bill, not kill the legislation.
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                               v. bits ii
    The revised staff draft, BITS II, on the other hand, breaks faith 
with those deal points. Though it provides for local government 
provisioning of broadband transport and services and makes an effort to 
preserve narrow-band universal service, E911 and homeland security in 
the IP era; the draft is seriously flawed. In this draft the telephone 
companies get everything they have asked for including fast track 
franchising, while avoiding most social obligations ``and everyone else 
loses.

1. Public safety standards are determined by the industry without 
        proper oversight. Local government is permitted only to enforce 
        what the industry deems important. This is a ridiculous 
        intrusion by the federal government and the private industry 
        into the management of local streets and sidewalks.
2. State and local government is not kept whole. BITS II limits rights-
        of-ways fees to the recovery of management costs. And Broadband 
        Video franchise fees are limited to 5% of subscriber revenue, 
        not 5% of all video service related revenues which is standard 
        today. In other words, Telcos not only get out from under 
        franchising, they get subsidized use of local government's 
        property. As a comparison, the federal government charges a 
        full market price to use public spectrum. Again, by these 
        provisions, Congress clearly expresses favoritism towards one 
        segment of the industry by granting subsidized rights to access 
        public property, and local government revenues are severely 
        curtailed in the process.
3. Community needs and interests are essentially abandoned. While cable 
        must continue to support local community needs and interests 
        such as PEG I-Nets and emergency alerts, the telcos do not. 
        This results in governmental discrimination favoring one class 
        of video provider and a reduction in community benefits.
4. Consumers lose choice and competition. Broadband competitors can 
        buyout their competition. There is no network neutrality.
    Collectively, these changes break faith with the promises of the 
Committee leadership and the promises of the industry. BITS II would 
not even replicate the rental fees contained in the recent Texas 
franchising legislation. We can only assume that Texas members want to 
preserve the compromise the industry agreed to not less than two months 
ago in Austin.
         vii. historical and current role of social obligations
    Finally, I welcome this opportunity to discuss with you the 
important social obligations inherent in current video regulation, and 
to explain why these core functions must be preserved, no matter the 
technology used to provide them. These include the allocation of 
capacity for the provision of public, education and government access 
channels, prohibitions on economic redlining, and a basic obligation 
that local government evaluates and the provider meets the needs of the 
community, including public safety needs.
                              PEG Channels
    Historically and today, locally produced video programming performs 
an important civic function by providing essential local news and 
information. Under the existing law, local government can require that 
a certain amount of cable system capacity and financial support for 
that capacity be set aside for the local community's use. This capacity 
is most often used in the form of channels carried on the cable system 
and are referred to as PEG for public, educational and governmental 
channels. Once the local franchise authority has established the 
required number of channels and amount of financial support required to 
meet community needs, they then determine the nature of the use, which 
may be mixed between any of the three categories. Public channels are 
set aside for the public and are most often run by a free-standing non-
profit entity. Educational channels are typically reserved for and are 
managed by various educational institutions. Government channels allow 
citizens to view city and county council meetings, and watch a wide 
variety of programming about their local community that would otherwise 
never be offered on commercial or public television. Whether it is 
video coverage of the governmental meetings, information about 
government services or special programs, school lunch menus, homework 
assignments or classroom instruction, the video programming used to 
disseminate this information allows all of us to better serve and 
interact with our constituents. Government continues to make innovative 
uses of this programming capacity as new interactive technology allows 
even better information to be available to our constituents.
    Many of you and your peers use this vital resource as a means to 
report back and to interact with your constituents at home. Local and 
state officials also use this important medium, and we want to ensure 
that it continues to be available now and in the future.
    It may be possible that through deliberative processes such as this 
hearing, we will identify new technological opportunities to assist us 
in our outreach to our citizens, but I suggest to the Committee today 
that these public interest obligations continue to serve an important 
purpose and must be preserved, regardless of the technology that allows 
us to make the programming available. I hope that you'll join with me 
in calling for the continuation of such opportunities in the new 
technologies that are evolving today. Certainly I should hope that you 
would not follow the tantalizing concept of reducing obligations on 
providers without careful consideration.
                           Economic Redlining
    One of the primary interests of local government is to ensure that 
services provided over the cable system are made available to all 
residential subscribers in a reasonable period of time. These franchise 
obligations are minimal in light of the significant economic benefits 
that inure to these businesses making private use of public property. 
While there may be those who find this provision unreasonable--we find 
it to be essential. Those who are least likely to be served, as a 
result of their economic status, are those who we need most to protect. 
This deployment helps to ensure that our citizens, young and old alike, 
are provided the best opportunities to enjoy the highest quality of 
life--regardless of income. The capacity that broadband deployment 
offers to our communities is the ability of an urban teen to become 
enriched by distance education opportunities that until recently 
couldn't possibly capture and maintain the interest of a teen (much 
less many adults). And, that's just the beginning--the possibilities 
are endless, as is the creativity of those in local government on 
making the most they can with the least they have.
                    Public Safety & Community Needs
    Local leaders often focus on the needs of their first responders 
when evaluating community needs. The current law provides that local 
governments may require the development of institutional networks as 
part of the grant of a franchise. This network is specifically for the 
purpose of serving non-residential areas such as government facilities 
including police, fire, schools, libraries and other government 
buildings. This infrastructure is typically designed to use state of 
art technology for data, voice, video and other advanced communications 
services. It has proven effective not only for day to day training and 
operations--but essential in emergencies, including the events of 
September 11, 2001.
    For example, the City of New York uses an INET for distance 
learning among city educational institutions, for city-wide computer 
network connectivity, for criminal justice applications (video 
arraignments), for employee training including first responder 
training, and for ensuring redundant intelligent communications 
capabilities for all of its police, fire and first responder needs. 
This network is constantly being improved upon, but functioned in many 
important capacities during the losses suffered on September 11, 2001. 
This network not only offers capacity for the city all year round, but 
redundancy in times of an emergency.
    Again, many Members of Congress live in communities that have 
required the deployment of these services, and are planning and using 
this infrastructure and the services to protect and serve the needs of 
their citizens. For instance the communities of Palo Alto, California, 
Marquette, Michigan, Laredo, Texas and Fairfax County, Virginia are all 
examples where the local government has determined that use of an 
institutional network is in the best interests of their community.
                            viii. conclusion
    Local government officials across the country are going to be very 
unhappy if this bill moves forward. We solicit the support of the bi-
partisan leadership and every member of this Subcommittee for our 
efforts to protect your and our constituents. We also appeal to your 
sense of fair play. This bill breaks faith with the promises we were 
made in exchange for our support of a solution. We were promised 
consumer choice, fair competition and preservation of our rights-of-way 
authority, and that local governments would be kept whole. BITS II 
reneges on all three promises. Any Member who supports BITS II without 
amendment will break faith with local government and consumers.
    Local government is ready to continue to negotiations on 
appropriate legislation prior to markup. We will come back to the table 
this afternoon and work through the Christmas break, if necessary, to 
achieve such a result.
    Thank you. I look forward to answering any questions you may have
                               Appendix A
Local Government Initial Comments to the House Staff Draft of 9-15-05
Local Governments support the following:
 Local government determines public access channel (PEG) obligations 
        and bonding requirements and Video provider must satisfy local 
        authority before offering service.
 All new technology providers must pay franchise fees.
 Subjecting the new class of ``Broadband Video Service'' and services 
        integrated with it to a franchise fee.
 The definition of gross revenue is an acceptable compromise.
 The draft takes a sound approach to right of way damage or facilities 
        abandonment, but some management changes are needed.
 Municipal broadband provision is sound, provided no cross 
        subsidization language is added.
 Concepts of network neutrality/open access.
Local Governments have the following concerns:
 The FCC is the wrong place for right-of-way and franchise fee dispute 
        resolution. The FCC lacks capacity and expertise. The present 
        court enforced mechanism works and is appropriate.
 To remain whole and to protect public safety networks, local 
        governments require compensation for current in-kind services 
        received via franchising in addition to the current franchise 
        fee.
 Local government must be able to protect its citizens' interests and 
        its rights under local, state, and federal law through 
        effective enforcement provisions. For example, local government 
        must be able to conduct audits and collect documents 
        appropriate documentation to monitor operator compliance.
 The draft should include clearer and broader savings clauses, 
        including clauses that more precisely protect local authority 
        with respect to: taxes, zoning with respect to cell towers, 
        damages immunity for actions related to PEG/right of way, and 
        state and local consumer protection laws.
 While local government understands the concern, and is willing to 
        help develop streamlined procedures for franchising, local 
        government has strong reservations about any mechanism whereby 
        the federal government grants access to locally owned property.
 Public access (PEG) capacity and use must evolve and advance with 
        advances in commercial services and technology. Providers must 
        be obligated to interconnect to receive PEG programming.
 While generally a strong proposal, a few adjustments are necessary to 
        protect local government's ability manage the right-of-way such 
        as allocation of relocation and management costs. Companies may 
        not create their own safeguards to protect the public health, 
        safety, and welfare.
 Local government believes that competition is important for all 
        users. Congress should mandate non-discrimination based upon 
        income, race, ethnicity, etc. Local elected leaders are in the 
        best position to make decisions about build out obligations.

    Mr. Upton. Thank you. Mr. Putala?

                 STATEMENT OF CHRISTOPHER PUTALA

    Mr. Putala. Thank you. Thank you, Mr. Chairman Upton, 
Chairman Barton----
    Mr. Upton. Can you--you got to hit that button.
    Mr. Putala. Is that better?
    Mr. Upton. That is better.
    Mr. Putala. Thank you, Chairman Upton, Chairman Barton, 
Ranking Member Markey, members of the subcommittee. EarthLink 
is the Nation's largest independent Internet service provider, 
and we appreciate the opportunity to testify today.
    At the outset, let me say that the staff discussion draft 
takes, in our view, steps toward an appropriate regulatory 
framework for broadband communications. However, the staff--the 
draft also takes some half-steps that should be improved, as 
well as some missteps that should be reversed.
    EarthLink's comments on the discussion draft focus on three 
key goals. Goal one, keeping the consumer's ability to choose 
his or her service providers foremost in mind, the draft wisely 
includes provisions to ensure that broadband transmission 
providers do not interfere with the customer's lawful use of 
the Internet--the net neutrality provisions. The threat of 
Internet discrimination is a real and present danger to 
consumers. A recent report from CIBC, a respected investment 
bank, goes so far as recommending to Telco and cable companies, 
a top-10 list of anti-competitive network discrimination 
techniques. Given that threat, we believe the current draft 
should be improved.
    For example, making it clearer that while different speeds 
and different pricing of Internet service can be offered to all 
consumers to accomplish network management, but once a consumer 
has purchased the right to use the express lane, they should be 
able to use that express lane for all applications, not just 
those applications their BITS provider would prefer. Network 
owners must not be allowed to favor their own customers, their 
own applications, once folks are in their express lanes.
    Another way to ensure that the consumer is in charge is by 
adding a provision for stand alone broadband, known in less-
polite circles as naked DSL. Too many consumers are forced to 
buy regular voice phone service when they buy DSL service. Why 
should a consumer who wants to use VoIP instead of traditional 
phone service have to spend $25 to $50 a month for phone 
service he doesn't want in order to get broadband service. The 
staff draft should be modified by adding a new provision to 
guarantee that consumers have the option of purchasing 
standalone broadband without being forced to buy regular phone 
service.
    I agree with Mr. Ellis about following the wireless 
success. Over the past decade, this committee has time and 
again gotten it right when facing issues relating to the 
wireless industry. 10 years ago, wireless was a duopoly, but 
this committee took actions to encourage new facilities, 
protect interconnection rights, and give the wireless industry 
reasonable time to comply with a host of government mandates. 
We were awarded with a vibrant, competitive wireless 
marketplace. We are pleased to know that the staff draft takes 
an important step to encourage new broadband facilities by 
eliminating current and future prohibitions on municipal 
broadband initiatives. EarthLink is proud to be leading the 
effort to unwire America's cities with WiFi technology, 
delivering the Internet wirelessly and affordably.
    EarthLink is already partnered with the city of 
Philadelphia to build, own and manage, at our cost, a wireless 
network to provide broadband to the entire 135 square miles of 
Philadelphia. This will be the Nation's largest municipal WiFi 
network, powered by the equivalent of just 600 light bulbs, 135 
square miles will be lit by the promise of affordable broadband 
access.
    The wireless example also highlights an important misstep 
in the staff draft relating to the lack of protections 
guaranteeing interconnection and traffic exchange. 10 years 
ago, wireless faced the same situation Internet voice traffic 
does today: relatively few folks on a wireless network trying 
to get connected to lots of folks on the incumbent telephone 
companies' network. Recognizing their advantage, the phone 
companies often required wireless to pay for calls into their 
network and for calls from their network. In other words, head 
I win, tails you lose, for the incumbent because wireless had 
no negotiating leverage.
    Fortunately, Congress took significant steps in 1993 and 
1996 that recognized that given such a disproportion of market 
power, a small network was never going to have even the chance 
to become a big member. Unfortunately, the staff draft does too 
little to address this practical problem. While the requirement 
to interconnect is included, there is no meaningful 
enforcement. FCC arbitration is possible, but with no criteria 
or standards to define anti-competitive behavior. We are aware 
that the staff draft has a major shortfall in this respect and 
we urge that it be corrected.
    Let me close with the third goal, a plea for a regulatory 
timeout. Over the past 3 years, Telecom rules have been in a 
constant state of flux. The staff draft remains largely silent 
on the old debate of the past decade. I ask the subcommittee to 
take a modest additional step, a step to an affirmative 
timeout. The FCC has identified a clear investment-based path 
to full deregulation. If an ILEC builds fiber to even 500 feet 
of a customer's home or business, they are entirely free of any 
loop unbundling obligations.
    Congress should call a lengthy timeout against further 
piecemeal litigation over loop unbundling, allowing EarthLink 
and others to make investment decisions based on what is 
happening in the marketplace, not what is happening in 
regulator's offices.
    Thank you for the opportunity to testify. We look forward 
to your questions.
    [The prepared statement of Christopher Putala follows:]
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    Mr. Upton. Thank you. Mr. Rehberger?

                  STATEMENT OF WAYNE REHBERGER

    Mr. Rehberger. Good morning, Chairman Upton, Chairman----
    Mr. Upton. You need to hit that mike button as well.
    Mr. Rehberger. Good morning, Chairman Upton, Chairman 
Barton, and members of the committee. Thank you for inviting me 
here today. Today I am testifying on behalf of XO 
Communications. We are the largest competitive CLEC in the U.S. 
today, and COMPTEL, the competitive communications industry 
trade association, of which XO is a board member. I ask that 
COMPTEL's analysis of the staff draft, which is included in my 
written statement, be included as part of the record.
    For decades, it has been the innovation of entrepreneurial 
companies coupled with marketing open regulation--market 
opening regulations, cost-based compensation for network 
access, that have brought choice, lower prices, and new 
technologies and services to the customer. If we look back a 
little bit, we know that the Bell companies had DSL technology 
years before the 1996 Telecom Act, but they never deployed that 
technology until Covad aggressively deployed it. Until 
recently, the Bell's had no incentive to offer VoIP technology, 
until Vonnage paved the way in the consumer market, and 
companies like XO offer VoIP products to business customers.
    As I mention in my written statement, there appears to be 
several mistaken assumptions underlying the draft regulation 
related to Telecom. First, the draft seems to imply that 
packet-switched Internet and circuit-switched network, or PSTN 
networks, are physically separate networks. Consider the 
following: in your home today, there is a wall jack that 
connects the PTSN providing plain old telephone service to you. 
If you plug your computer into that same jack, you have dialup 
Internet access. And if you plug a digital subscriber line 
modem into that very same jack, you can have high-speed 
Internet access. That high-speed Internet access also allows 
you to get voice over the Internet protocol, or VoIP, calls 
over the exact same wall jack. Nothing has changed except for 
the electronics that are attached to the wall jack and the 
wires. However, under this draft, regulations will differ based 
on the use of packet- or circuit-switching. In particular, 
Section 105 appears to protect the competitor's access to 
unbundled network elements and co-locations but it seems to 
restrict such rights to only the circuit-switch world. 
Furthermore, a telecommunication service qualifies for this 
protection, possibly meaning that only the provision of 
circuit-switch voice would qualify. It is not clear how 
innovate companies who operate one integrated network and 
provide both services would be able to comply with two 
different regulatory regimes.
    The second assumption is that voluntary commercial 
negotiations for interconnection under Section 103 of the draft 
will provide access to the incumbents' networks at rates and 
terms that will continue to force their competition and 
innovation. Decades of telecommunication history have proven 
otherwise. Without the backstop of the 1996 Act, which requires 
that interconnection be on just, reasonable and non-
discriminatory terms and conditions, provide--and it provides 
effective enforcement mechanism, commercial agreements alone 
would not have provided a viable option for competitors.
    To compete, XO and other competitors have been building 
fiber rings in the metro areas to carry traffic that is 
aggregated from numerous business customers, and we also build 
long-distance networks to carry aggregated traffic between 
metropolitan areas. But, in the business market, it is a fact 
that fewer than 10 percent of the office buildings in the U.S. 
have alternative fiber connected to them. Instead, for over 90 
percent of the buildings and those customers, the incumbents 
and competitors alike use the connection to the building that 
is owned by the ILEC. Speaking from XO's own experience, I can 
assure the committee members that where the FCC has granted 
relief of certain interconnection requirements, or access to 
unbundled network elements, on many occasions, the Bell 
companies have either refused to negotiate for use of their 
networks, imposed conditions that have driven up customer 
prices, or have made it uneconomical for us to compete. In some 
instances, XO may be able to negotiate marginally better terms, 
given our size and scale, but that won't be the case for the 
hundreds of other competitors who are smaller than we are.
    My final point to the committee is that the staff draft 
would carve out the telecommunications industry as the only 
network industry in America that does not operate under some 
form of highly regulated network sharing. Competing electricity 
providers share transmission access, competing rail providers 
share rail access, and competing natural gas suppliers share 
pipelines. In fact, the network sharing rules embodied in the 
1996 Act have benefited the telecommunications industry for 
over 10 years. They are the reason we continue to experience 
the industry innovations and customer choice we have today. Why 
should we all of a sudden treat the telecommunications industry 
different based on the next popular technology.
    Mr. Chairman, thank you for the opportunity to appear 
before the subcommittee today, and I am happy to answer any 
questions.
    [The prepared statement of Wayne Rehberger follows:]
  Prepared Statement of Wayne Rehberger, Chief Operating Officer, XO 
                          Communications, Inc.
    Mr. Chairman and Members of the Committee, thank you for inviting 
me here today. I am Wayne Rehberger, Chief Operating Officer of XO 
Communications, Inc. of Reston, Virginia. Today I am testifying on 
behalf of XO Communications and COMPTEL, the competitive communications 
industry trade association of which XO is a board member.
                    background on xo communications
    XO Communications is the largest independent competitive local 
exchange carrier providing telecommunications and broadband services. 
Originally formed in 1996, XO has expanded its telecommunications 
offerings from its original 4 small markets to 70 metro area markets in 
26 states. Our company provides a comprehensive array of voice and data 
telecommunications services to small, medium, and large business 
customers. Our voice services include local and long distance services, 
both bundled and standalone, other voice-related services such as 
conferencing, domestic and international toll free services and 
voicemail, and transactions processing services for prepaid calling 
cards. XO data services include Internet access, private data 
networking, including dedicated transmission capacity on our networks, 
virtual private network services, Ethernet services, and web hosting 
services.
    XO has invested heavily in building its own facilities spending 
over $8 billion and constructing over 1.1 million miles of fiber. We 
have metro fiber rings to connect customers to our network, and we own 
one of the highest capacity and scalable IP backbones in the industry, 
capable of delivering data end-to-end throughout the United States at 
speeds up to 10 Gigabits per second.
                         background on comptel
    Founded in 1981, COMPTEL is the communications industry association 
of choice and represents competitive service providers and their 
supplier partners. Based in Washington, D.C., COMPTEL advances its 
members' businesses through policy advocacy, education, networking, and 
trade shows. COMPTEL members are entrepreneurial companies building and 
deploying next-generation networks and services to provide competitive 
voice, data, and video services. COMPTEL members create economic growth 
and improve the quality of life of all Americans through technological 
innovation, new services, affordable prices and customer choice. 
COMPTEL members share a common objective: advancing communications 
through innovation and open networks. For decades, it has been the 
innovation of entrepreneurial companies coupled with market opening 
regulations that have brought choice to customers and new technologies 
and services to the market. The Bell companies had DSL years before the 
1996 Act, but did not deploy this technology until Covad aggressively 
deployed DSL. Same is true for VoIP. The Bells had no incentive to 
offer VoIP, until Vonage paved the way. This tradition of competitive 
innovation is continuing with the numerous companies that are creating 
new ways to serve customers using cutting edge technologies. For these 
reasons, I appear before the Subcommittee to voice significant concerns 
with the staff draft
                              staff draft
    In my testimony today, I will make the following points about the 
discussion draft.
    1) The discussion draft is based on a number of mistaken 
assumptions.
    2) The discussion draft would create ``gatekeepers'' to the 
Internet.
    3) The discussion draft adopts an approach that has been rejected 
for every other networked infrastructure industry in the United States.
Mistaken Assumptions
    The draft is based on a number of mistaken assumptions, which 
include the following:

1) That the packet-switched Internet and the circuit-switched Public 
        Switched Telephone Network (PSTN) are physically separate 
        networks;
2) That competitors can easily build networks that reach end users; and
3) That voluntary negotiations without rules or enforcement will work.
    A simple example illustrates why the first assumption is mistaken. 
In your home today there is a wall jack that connects to the PSTN. If 
you plug a phone into that jack you have voice service. If you plug a 
fax machine into that same jack, you have an analog data service. If 
you plug your computer into that same jack, you have dial up Internet 
access, and if you plug a digital subscriber line (DSL) modem into that 
very same wall jack, you have high speed Internet access. That high 
speed Internet access also allows you to get Voice over Internet 
Protocol--VoIP--from the exact same wall jack from which you have 
gotten circuit-switched voice service for years.
    So, what changed? Clearly the wall jack did not change, nor did you 
get new wires strung to your house. All that changed were the 
electronics that you and the phone company attached to that wall jack 
and wires. The problem is that the draft bill aims to change the 
regulatory regime based on the type of electronics attached by 
differentiating between the uses of packet switching different from 
circuit switching. XO, like many competitive companies, uses a 
combination of packet and circuit switching in providing services. 
Under this draft, my company would be forced to operate under two 
separate and incompatible federal regimes.
    What the above example illustrates is that the Internet is not a 
separate network. Rather it is the term used to describe a multitude of 
interconnected networks that all use a common protocol to communicate. 
XO's network is part of the Internet, as are the networks run by AT&T, 
SBC, MCI, Verizon, Global Crossing, Bell South, Level 3, Qwest, British 
Telecom, and many others. These networks are interconnected today 
because section 201 of the Communications Act and the Commission's 
rules ensure that any party can get interconnection on just, reasonable 
and non-discriminatory terms.
    It's important to understand that the Internet is simply the next 
evolution of the PSTN. Less efficient circuit switching is being 
replaced with more efficient packet-switching, just as copper and 
coaxial cable are being replaced with fiber because fiber is cheaper to 
maintain and has far greater bandwidth. Like new parts added to an 
older car to ``supe it up'' and make it go faster, fiber and newer 
electronics have been plugged into the existing networks to convey 
information faster. It's improved, but it's not a new network. Same 
with the old car that contains a new fuel injection system or new 
tires: it's improved, but it's not a new car.
    The second mistaken assumption is that anyone who wants to compete 
can build a network that reaches end user customers. COMPTEL members 
can assure you that nothing is further from the truth. In fact, the 
only ubiquitous wireline networks that exist today were all built in a 
monopoly environment. The incumbent phone companies like Verizon, SBC, 
BellSouth, and Qwest each had decades in which to build out their 
networks to all homes and businesses. Likewise, the incumbent cable 
companies like Comcast, Time Warner, Cablevision, and Cox all had at 
least a decade of protected franchises in which to construct their 
networks to residential users. In contrast, wireline competitors to the 
incumbent phone and cable operators have had to build their networks in 
the face of a competitor who already has a network and customers, and 
consequently a revenue stream with which to pay for upgrades and 
improvements to the network.
    The story is somewhat different for wireless services, but only 
slightly. In that case new PCS licenses were granted before the two 
existing cellular licensees were firmly entrenched, but even so the two 
largest network operators are owned by incumbent phone companies who 
were holders of the original cellular licenses.
    Another telling example is the current state of facilities based 
competition in the business market. XO operates exclusively in the 
business market today, which is more concentrated. It is a fact that 
fewer than 10 percent of the office buildings in the U.S. have 
alternative fiber connected to them. Instead, for over 90 percent of 
the buildings, incumbents and competitors alike use the high speed 
fiber connection to the building that is owned by the incumbent. In 
this largely deregulated business marketplace, the market has decided 
that it is not economically efficient to build multiple networks to 
connect to the same building. Instead, what XO and other competitors 
have been doing in an efficient and cost effective manner is building 
fiber rings in metro areas to carry traffic aggregated from numerous 
business customers, and also building long distance networks to carry 
aggregated traffic between metropolitan areas. What this illustrates is 
that the assumption in the bill that those who want to compete in 
offering communications services to business and residential customers 
can simply build their own network is mistaken due to basic 
economically realities.
    Finally, some view the voluntary commercial negotiations for 
interconnection under Section 103 in the draft as a solution to provide 
access to incumbent's networks at rates that will allow the competitor 
to compete. Again, a simple review of actual behavior in the 
marketplace demonstrates that this assumption is also mistaken.
    Today all interconnection with networks that reach end users has 
been accomplished by rule of law. Competitive carriers like XO get 
interconnection to incumbent phone companies through under sections 201 
and 251 of the Communications Act. Cable companies also get the 
interconnection they need to provide Internet access and VoIP through 
section 251, and also make use of special access circuits available 
under section 201. Wireless carriers get access to the incumbent phone 
networks under sections 201, 251, and 332(c) of the Communications Act. 
Each of these sections not only require interconnection of networks, 
they also require that such interconnection be on just, reasonable, and 
non-discriminatory terms and conditions and provide enforcement 
mechanisms. Yet for packet switched services this draft essentially 
eliminates those requirements.
    In the absence of such requirements, the market has already 
demonstrated repeatedly that voluntary commercial negotiations will not 
work. The requirements cited above were adopted by Congress in 1934 
because AT&T was refusing to interconnect independent providers, in 
1993 because incumbent phone companies were refusing to interconnect to 
wireless carriers, and in 1996 because incumbent phone companies were 
refusing to interconnect with competitors. Competitors have also found 
it difficult to negotiate their way onto cable networks. Currently, 
none have been able to do so.
    Interestingly, the draft bill itself recognizes that voluntary 
negotiations will not work to provide competition with respect to video 
services. Section 304(a)(1)(E) of the bill would require the FCC to 
apply to Broadband Video Service providers the same programming 
ownership restrictions and regulations that are currently imposed on 
cable operators. Those programming provisions were adopted by Congress 
precisely because cable operators were refusing to permit competing 
satellite providers to have access to programming shown on cable 
networks. The Bell Companies, as new entrants into the video 
marketplace, need those access requirements in order to offer competing 
video service. If it is okay for the Bell companies to use their 
network ownership to deny access to competitors except where voluntary 
agreements provide such access, why then shouldn't the cable operators 
be able to use their interests in video programming to deny video 
content to Bell Companies except where the Bell Companies can negotiate 
such access on a voluntary basis? COMPTEL and XO understand the need 
for those programming access provisions to provide video competition, 
and believe that the need for those provisions underscores the need to 
continue similar requirements to ensure competition in communications 
marketplace.
    Finally, speaking from XO's own experience, I can assure the 
committee members that in every instance in which the Regional Bell 
Operating Companies have been relieved by the FCC of statutory 
requirement regarding interconnection or access to unbundled network 
elements, they have either refused to negotiate at all with respect to 
allowing XO or other competitors to use their networks, or else have 
imposed onerous terms and conditions that drive up customer prices and 
limit competition. In some instances, XO may be able to negotiate, 
given its size and scale. However, subjecting the entire industry to a 
one-size fits all negotiation regime would amount to the equivalent of 
trying to negotiate with a school bully for your lunch money while he 
has you in a headlock.
Internet Gatekeepers
    Because of its reliance on false assumptions, the draft bill would 
result in the establishment of ``gatekeepers'' to the Internet. This 
bill would create a world where the few companies that control the 
network portals that reach end-users, the ``on-ramps'' to the Internet, 
would be able to control access to the Internet from both the consumer 
perspective and from the perspective of companies that must connect to 
the Internet to conduct business. The reason they would be able to 
exert this control is that everyone who seeks to offer content and 
services over the Internet--whether it is Amazon seeking to sell books, 
Yahoo! or Google offering search services and content, Disney seeking 
to offer movies, Vonage seeking to offer VoIP, or XO offering 
communications to businesses--all of us need to reach end users in 
order to offer our services. Those who control the access to end users 
ultimately control the Internet if there is no obligation to permit 
competitors to access those end users on reasonable terms and 
conditions.
    The ``net neutrality'' provisions in section 104 of the draft bill 
would do nothing to prevent incumbent network operators from acting as 
gatekeepers for two reasons. First, because the interconnection 
requirements in section 103 of the draft bill include no requirements 
for direct interconnection on reasonable and non-discriminatory terms 
and conditions, providers of content and services that compete with 
those offered by the network operator that controls access to the end 
user, the network operator will simply demand uneconomic terms and 
conditions that effectively prevent competitors from offering services 
over the operator's network. And for those competitors that nonetheless 
attempt to provide service notwithstanding uneconomic interconnection 
terms and conditions, the exceptions in section 104(b) for network 
management, security, and provision of video or premium services 
eviscerate the consumer protections purportedly provided in section 
104(a).
The U.S. Economy Is Made Up Of Various Shared Networks
    I think it is essential point out that the staff draft would carve 
out the telecommunications industry as the only networked industry in 
the history of America that does not operate under some form of 
regulated network sharing. The electricity, gas, railroad and airline 
industries all operate under a shared network structure that requires 
network owners to provide access to their competitors in exchange for 
cost plus a reasonable profit. It should apply the same principle to 
the communications industry of today, and the future: access to all 
public networks upon reasonable request at just and reasonable terms, 
rates and conditions.
    The draft before us today would allow competition only if 
competitors were to first build redundant infrastructure to every home 
and business in America. But time and again Congress has decided that 
such redundancy is uneconomical. Furthermore, rational market players 
would never undertake such an endeavor. As I mentioned earlier, XO has 
invested over $8 billion in its own facilities. However, even with this 
extensive network, we are nowhere close to having ubiquitous on-net 
coverage. To build such a network would require over $100 billion and 
many decades to construct--not to mention monopoly rights like the 
Bells have had. Instead, we reach most customers by procuring 
facilities or circuits from other providers.
    Competitors want the right to build facilities when they determine 
it makes economic sense to do so. In fact, XO is committed to building 
additional facilities, but only if sufficient customer revenue exists 
to justify the cost. However, that is very different from being 
required to build facilities to every customer to whom one wishes to 
offer service. If there were no existing facilities, obviously someone 
wishing to offer service must construct them. But that is a very 
different proposition from what competitors face today. Today every 
existing home and business has at least one wireline communications 
network already constructed to it. Well over 90 percent of those 
customers, both business and residential, are passed by at least one 
broadband pipe--fiber, coaxial cable, or DSL capable copper wire. In 
light of these existing facilities, the only rational way for 
competition to exist is by sharing the existing infrastructure--
regardless of whether that infrastructure was built by an incumbent or 
a competitor.
    Sharing infrastructure is not an unusual concept. In fact, it is 
the norm rather than the exception. Congress did not require that 
alternate energy providers build a second or third set of electrical 
wires into each home in order to provide competition in energy pricing. 
Instead, the grid is shared in exchange for cost plus a reasonable 
profit. Competing railroads are required to allow the use of their 
tracks by their competition. Gas suppliers must share a common 
pipeline. Why? Because basic economic realities make it uneconomical to 
build redundant networks to end users. Telecommunications is no 
different and should not be treated differently.
                               conclusion
    As my testimony illustrates, the problems created by the draft bill 
are numerous and complex. If adopted it would create gatekeepers for 
the Internet, with negative consequences that would ripple through all 
segments of our Information economy. The bill would re-establish a 
monopoly over communications services for most businesses in this 
country, and at best would create a duopoly for most residential 
consumers. I urge the committee to adopt positive and constructive 
legislation that will give all competitors, and Internet users, access 
to communications networks. This legislation need not be complex. It 
should adopt basic rules that apply to all communications providers 
that use public rights of way or spectrum--be they incumbents or 
competitors and regardless of whether they use packet-switching, 
circuit-switching, or copper, coaxial cable, fiber, or wireless. The 
core principles should be service upon reasonable request, non-
discrimination, interconnection, unrestricted resale, and net 
neutrality, with federal rules enforced by State commissions.
    The bottom line is that the vibrant and competitive Internet that 
we all increasingly rely on today is the result of over 30 years of 
pro-competitive decisions by Congress and the FCC. Those decisions 
regulated the transmission networks that make up the Internet, while 
leaving the applications provided over those networks unregulated. By 
removing the basic regulations governing the transmission networks, 
this bill would permit private parties--namely the limited number of 
private parties who built ubiquitous networks in a monopoly 
environment--to use those networks to control access to the Internet. 
One only has to refer to recent comments made by SBC's CEO, Ed Whitacre 
in a recent Business Week interview: ``Why should they [competitors] be 
allowed to use my pipes?'' This statement, alone, shows how anti-
competitive forces can have a debilitating effect on competition and 
innovation.
    Attached to my testimony is an analysis COMPTEL had prepared which 
details specific problems with those provisions that are of the 
greatest interest to COMPTEL members. In the interests of time, I 
respectfully request that COMPTEL's analysis be included in the record 
as part of my testimony. Thank you for allowing me to testify today on 
behalf of XO and COMPTEL.

    Mr. Upton. Thank you. Mr. Salas?

                  STATEMENT OF EDWARD A. SALAS

    Mr. Salas. Good morning, Mr. Chairman and members of the 
subcommittee.
    Mr. Upton. You need to hit that button as well--mike 
button.
    Mr. Salas. Good morning.
    Mr. Upton. No. It is not working? Sorry.
    Mr. Salas. Good morning, Mr. Chairman and members of the 
subcommittee. Thank you for holding this hearing today. I am 
Edward Salas, Vice President of Network Planning for Verizon 
Wireless. I am responsible for network strategy, planning, 
purchasing, and administration. I am here representing Verizon 
Wireless.
    Verizon Wireless thanks you and your colleagues for your 
time and effort put forth in working to craft legislation that 
updates our Nation's telecommunications laws. We also 
appreciate the attention that you gave to the concerns raised 
by Verizon Wireless on the first draft. Specifically, we 
applaud your efforts in streamlining the far-reaching national 
consumer standards, welcome the progress toward improved net 
neutrality provisions, and appreciate changes to the FCC's 
role. We believe that these revisions were clearly a step in 
the right direction, and it is Verizon Wireless's hope that as 
the committee continues this drafting process, consensus is 
reached on a bill that fosters competition, removes unnecessary 
government regulation, and allows a deregulated market to bring 
benefits to consumers.
    The wireless industry has been a critical driver of the 
national economy, generating tens of millions of new jobs, 
building new communications infrastructure, and serving more 
than 190 million Americans. With certain modifications, the 
draft bill can lead to even more benefits to consumers and the 
economy.
    Today I will share with you some of our specific concerns. 
I hope that we will have the opportunity to share with you some 
additional concerns and suggestions as your legislative efforts 
continue.
    (1) Verizon Wireless is making major investments in 
broadband wireless technology. Verizon Wireless is a firm 
believer in the broadband future. We were the first company to 
roll out what we consider real 3G services, and we are leading 
the industry in broadband deployment. We first deployed our 
EVDO service in October 2003 in San Diego and Washington, D.C. 
We have invested well over $1 billion in expanding our EVDO 
offering to encompass more than 170 major metropolitan markets 
and 84 major airports across the nation, and we will continue 
to expand the customers' ability to access this amazing 
technology.
    (2) Wireless broadband relies on IP technologies and 
leverages our circuit-switch technology as well. For voice and 
narrow-band data, our network operates over traditional 
circuit-switch facilities. Our EVDO broadband service is 
fundamentally an IP-based technology working over a standard 
non-IP air interface, but all of our EVDO-based devices have a 
circuit-switch capability to support all of our basic voice and 
legacy services. Many of our competitors also deliver their 
services over a single integrated wireless network, seamlessly 
weaving high-speed and lower-speed capabilities, as well as 
packet- and circuit-switch technologies.
    (3) The draft bill maintains the old silo approach for new 
technologies. Verizon Wireless agrees that IP-enabled services 
are the platforms of the immediate telecommunications future. 
On the other hand, the draft bill is structured along the lines 
of the regulatory model for landline services that has been in 
place for decades. Consumers don't know or care whether the 
wireless services they buy are deployed over a packet 
technology or a circuit-switch one. They simply want the 
services and they want them to perform reliably. Attempting to 
regulate such packet-switch digital services and applications 
in silo-like regimes where service is provided over a single 
platform may be regulated and taxed differently, will create an 
administrative and regulatory nightmare.
    (4) The draft bill does not expressly encompass mobile 
wireless services. Verizon Wireless is also concerned that the 
bill could be read to omit wireless altogether from the 
landmark deregulatory approach that would apply to BITS 
providers. The draft bill appears to require that a BITS 
provider must use a packet-switch transmission service. As I 
noted earlier, Verizon Wireless, and other wireless companies, 
currently provide broadband service over an integrated platform 
of both packet- and circuit-switch technologies. The two cannot 
be segregated. It is time to remove the regulation for wireless 
packet technology. Why should the analysis differ merely 
because the broadband technology at some times and in some 
places may rely on a hybrid circuit-switch-packet technology. 
If the committee agrees, the simplest path to that result is to 
modify the definitions of BITS provider to include all services 
that are offered in conjunction with BITS.
    (5) The net neutrality provisions should recognize the 
uniqueness of wireless services. We have some--we do have some 
concerns about the net neutrality, or access to BITS, in 
Section 104 of the draft legislation because they do not appear 
to acknowledge the critical technology distinctions between 
wireline and wireless networks. The air interface on a wireless 
network is significantly more bandwidth-limited than wireline's 
dedicated fiber optic or copper facilities, and must be shared 
by all users in a defined geographic area. Network performance 
and resource availability in the wireless environment is thus 
much more sensitive to variations in usage than a wireline 
network. In order for us to ensure the integrity and 
reliability of our network, and to provide consumers with the 
best available online experience, we cannot support 
unrestricted access to the Internet for downloading any and all 
applications or the connection of devices not approved for use 
on our network. Verizon Wireless does not block customers from 
accessing the Internet as long as they are lawful and not 
associated with any security or misuse risk. We believe we must 
control the amount of resources that any individual customer 
can demand from our network. The draft legislation is right to 
preserve the BITS provider's authority to protect the security 
and reliability of its network and broadband transmission 
services, but it is not clear how this authority will be 
reconciled with provider's duty not to block access to any 
lawful content, application or service provided over the 
Internet, and to permit subscribers to connect and use devices 
of their choosing. At least in the wireless environment, the 
device is, in fact, an extension of the network.
    (6) Congress should make clear that wireless is to be 
subject to Federal regulation. While it is clear that we are 
trying to achieve the same result of a national deregulatory 
framework, it is our belief that we may be subject to entirely 
new, uncertain, complex re-regulatory regime. It would retreat 
from and reverse the deregulation that has so served the 
Nation's economy and wireless customers. Now more than ever, 
States are attempting to reassert utility-type regulation over 
the wireless industry. Ironically, at the same time, the 
industry has been deploying national networks offering national 
rate plans that offer unparalleled benefits for consumers. 
States threaten to undermine these benefits by imposing a 
patchwork of burdensome and inconsistent rules. Congress can 
simultaneously recognize the benefits of competition and 
prevent the harmful impacts of State-by-State regulation of a 
national industry by completing the deregulation began in 1993. 
The Federal Government is in the best position to oversee this 
national industry which serves the public across and without 
regard to State lines.
    In conclusion, the committee took the first step in 1993. 
You have a unique opportunity to buildupon that success. 
Verizon Wireless hopes that as your legislative process 
continues, you keep in mind the technical complexities of the 
wireless network, and allow us the freedom to maintain our 
network resources and the ability to secure our network. We 
look forward to working with you in this process.
    [The prepared statement of Edward A. Salas follows:]
    Prepared Statement of Edward A. Salas, Vice President, Network 
                       Planning, Verizon Wireless
    Mr. Chairman and Members of the Subcommittee, thank you for holding 
this hearing today. I am Edward Salas, Staff Vice President of Network 
Planning for Verizon Wireless. I am responsible for network strategy, 
planning, purchasing and administration. I am here representing Verizon 
Wireless.
    Verizon Wireless thanks you and your colleagues for the time and 
effort put forth in working to craft legislation that updates our 
nation's telecommunications laws. We also appreciate the attention that 
you gave to the concerns raised by Verizon Wireless on your first 
draft. Specifically, we applaud your efforts in streamlining the far-
reaching national consumer standards, welcome the progress toward 
improved net neutrality provisions, and appreciate changes to the FCC's 
role. We believe that these revisions were clearly a step in the right 
direction, and it is Verizon Wireless' hope that, as the committee 
continues its drafting process, consensus is reached on a bill that 
fosters competition, removes unnecessary government regulation, and 
allows a deregulated market to bring benefits to consumers.
    Verizon Wireless views our appearance here today as an opportunity 
to share our views on your revised staff draft, and offer some insight 
on what we believe it will take to promote wireless competition, incent 
continued investment that benefits the economy and subscribers, and 
remove regulatory impediments that thwart innovation. This is the right 
time, and the right opportunity, to complete the deregulatory process 
for mobile radio services that Congress began in 1993 with passage of 
the Omnibus Budget Reconciliation Act. Congress had the foresight to 
recognize that removing wireless services from traditional, cradle-to-
grave utility regulation would unleash the competitive marketplace to 
deliver benefits to consumers. Congress' expectation proved accurate. 
The wireless industry has been a critical driver of the national 
economy, generating tens of millions of new jobs, building new 
communications infrastructure, and serving more than 190 million 
Americans. With certain modifications the draft bill can lead to even 
more benefits to consumers and the economy.
    Today, I will share with you some our principal concerns. I hope 
that we will have the opportunity to share with you some additional 
concerns and suggestions as your legislative efforts continue.
1. Verizon Wireless is Making Major Investments in Broadband Wireless 
        Technology.
    I first want to describe the actions our company is taking to offer 
broadband services to our customers. There is no doubt that broadband 
has enormous potential capabilities to deliver many features and 
capabilities to wireless consumers. Voice, text messaging, email, 
streaming video, emergency alerts, location services, and Internet 
access are only some of the amazing capabilities that this technology 
promises. Verizon Wireless is a firm believer in the broadband future. 
We were the first company to roll out what we consider real ``3G'' 
services, and are leading the industry in broadband deployment. We 
first deployed our ``EVDO'' service in October 2003 in San Diego and 
Washington, D.C. EVDO, derived from the CDMA 2000 technology family, 
increases peak data download speeds up to 2 Mbps, and typical, user-
experienced download speeds range from 400 to 700 kbps. With EVDO, 
users can access exciting video applications via their handsets over 
our VCast service, or access the Internet through a wireless modem 
``aircard'' that is inserted into a laptop computer. We have recently 
reached agreement with three major computer manufacturers to 
incorporate this capability directly into their laptops. We have 
invested well over $1 billion in expanding our EVDO offering to 
encompass more than 170 major metropolitan markets and 84 major 
airports across the nation, and we will continue to expand the 
customers' ability to access this amazing technology.
2. Wireless Broadband Relies on IP Technology and Leverages Our Circuit 
        Switched Technology as Well.
    It is important to understand that Verizon Wireless and other 
wireless providers are using both IP and non-IP interfaces in their 
networks. For voice and narrowband data, our network operates over more 
traditional circuit switched facilities; at other times and places we 
operate in packet mode. Our EV-DO broadband service is fundamentally an 
IP-based technology working over a standard non-IP air interface, but 
all of our EVDO based devices have a circuit switched capability to 
support all of our basic voice and legacy services. Many of our 
competitors also deliver their services over a single, integrated 
wireless network, seamlessly weaving high-speed and lower-speed 
capabilities, as well as packet and circuit-switched technologies. The 
mix of packet and circuit technologies--and high-speed and lower-speed 
services--varies widely not only among wireless companies, but also in 
different geographic areas served by the same company. Moreover, that 
mix is constantly evolving as each wireless competitor works to offer 
the latest services to its customers including voice, Internet access, 
games, photos, music, and video services.
3. The Draft Bill Maintains the Old Silo Approach for New Technologies.
    Now I'd like to talk about how the draft bill fits or doesn't fit 
with the reality of integrated, ever-evolving technology of wireless 
broadband. On the one hand, the draft bill rightly focuses on IP-
enabled services, where the technology is going, not where it has been. 
Verizon Wireless agrees that IP-enabled services are the platforms of 
the immediate telecommunications future. On the other hand, the draft 
bill is structured along the lines of the regulatory model for landline 
services that has been in place for decades. Therefore, it incorporates 
the burdens of where we have been, rather than where we are going. It 
adopts multiple new classifications and definitions and applies 
different regulatory regimes to each. Verizon Wireless has concerns 
about this approach. The draft does not grapple with the rapid 
technological change, particularly in wireless, that eradicates these 
distinctions. Consumers don't know or care whether the wireless 
services they buy are deployed over a packet technology or a circuit-
switched one. They simply want the services and want them to perform 
reliably. Attempting to regulate such packet switched digital services 
and applications in silo-like regimes, where services provided over a 
single platform may be regulated and taxed differently, will create an 
administrative and regulatory nightmare.
    Our concern is that these regulatory distinctions will have the 
unintended consequence of impeding the innovations and growth of even 
newer services that are arising precisely because the distinctions 
among services to users are blurring.
4. The Draft Bill Does Not Expressly Encompass Mobile Wireless 
        Services.
    Verizon Wireless is also concerned that the bill could be read to 
omit wireless altogether from the landmark deregulatory approach that 
would apply to ``BITS'' providers. The draft bill appears to require 
that a BITS provider must use a packet-switched transmission service. 
As I noted earlier, Verizon Wireless (and other wireless companies) 
currently provides broadband service over an integrated platform of 
both packet and circuit-switched technologies. The two cannot be 
segregated.
    If the committee believes that it is time to deregulate competitive 
telecommunications services--a view Verizon Wireless strongly 
endorses--it needs to craft a definition of a BITS provider that 
includes all wireless technologies. If it is time to remove regulation 
for wireless packet-technology, why should the analysis differ merely 
because the broadband technology at some times and in some places may 
rely on a hybrid circuit-switched-packet technology (1xRTT has circuit 
switched layer and a packet layer)? In our view, the right course is to 
recognize it is time to remove the last vestiges of common carrier, 
utility-type regulation from wireless. If the Committee agrees, the 
simplest path to that result is to modify the definition of BITS 
provider to include all services that are offered in conjunction with 
BITS or carried on the same network platform as BITS.
5. The Net Neutrality Provisions Should Recognize The Uniqueness of 
        Wireless Services.
    If Verizon Wireless in fact qualifies as a BITS provider, we 
applaud the general approach of the draft bill to treat us as an 
interstate, national service. We do have some concerns about the ``net 
neutrality'' or ``Access to BITS'' in Section 104 of the draft 
legislation, because they do not appear to acknowledge critical 
technology distinctions between wireline and wireless networks. The air 
interface on a wireless network is significantly more bandwidth limited 
than wireline's dedicated fiber optic or copper facilities, and must be 
shared by all users in a defined geographic area. Moreover, various 
mobile applications place varying demands on this resource as well as 
the traditional load characterized by the raw number of customers 
operating in a cell. Network performance and resource availability in 
the wireless environment is thus much more sensitive to variations in 
usage than a wireline network.
    We will certainly offer subscribers service plans that involve 
varied and reasonable bandwidth and capacity limitations and services 
that protect consumers from unwanted content or messages. However, in 
order for us to ensure the integrity and reliability of our network, 
and to provide consumers with the best available on-line experience, we 
cannot support ``unrestricted'' access to the Internet for downloading 
any and all applications, or the connection of devices not approved for 
use on our network. Verizon Wireless does not block customers from 
accessing the Internet as long as they are lawful and not associated 
with any security or misuse risk. But we believe we must control the 
amount of resources that any individual customer can demand from our 
network. As managers of that resource, we need that flexibility so that 
we can provide our subscribers with the most reliable, consistently 
excellent mobile on-line experience that our network will support.
    The draft legislation is right to preserve a BITS provider's 
authority to ``protect the security and reliability of its network and 
broadband transmission services,'' but it is not clear how this 
authority will be reconciled with the provider's duty not to block 
access to ``any lawful content, application or service provided over 
the Internet,'' and to permit subscribers ``to connect and use devices 
of their choosing.'' At least in the wireless environment, the 
``device'' is in fact an extension of our network. In fact, under FCC 
rules, every one of our handsets, PDAs and air interface cards is 
licensed by the Commission and must comply with strict technical 
requirements. If we must allow customers to attach devices ``of their 
choosing,'' how can we be sure that we comply with the terms of our FCC 
licenses? We are not talking about plugging fax machines onto a 
landline network but about devices with complex and dynamic 
functionality that not only manage the applications we sell but enable 
basic radio connectivity and participate with the network in managing 
RF power settings. We test and certify every device on our network with 
great care and diligence. This process cannot be abdicated to the 
consumer.
    Consumers have multiple choices of wireless services as well as 
multiple broadband choices. In this context, there is no need to 
encourage consumers to second-guess the decisions of wireless network 
operators on how to run the network. We will respond to consumer demand 
for connectivity in the most efficient and effective ways available on 
our network. If we do not offer customers the features and capabilities 
they demand, they will ``vote with their feet'' and switch to a 
competitor. We are incented to provide the services that customers 
want.
    The net neutrality provisions should not substitute for the 
incentives we and other wireless carriers have to serve consumers. 
Either such provisions are going to be too rigid and inflexible--
discouraging innovation--or they are going to be too vague--leading to 
uncertainty and litigation. While the draft bill allows us to take 
``reasonable measures'' to protect the security and reliability of our 
network, who is going to determine when a measure is ``reasonable''? We 
thus recommend that Section 104 be modified to make clear that wireless 
BITS providers have the right to manage their network and the devices 
that can be used with that network.
6. Congress Should Make Clear that Wireless is To Be Subject to Federal 
        Regulation.
    While it is clear that we are trying to achieve the same result of 
a national deregulatory framework, it is our belief that we may be 
subject to an entirely new, uncertain, complex and re-regulatory 
regime. It would retreat from and reverse the deregulation that has so 
served the nation's economy and wireless customers. As creatures of a 
deregulatory environment, the simple thought of new regulatory 
compartments and obligations gives us pause. Verizon Wireless does 
believe that a national deregulatory regime for wireless is possible--
and much simpler.
    Now, more than ever, states are attempting to reassert utility-type 
regulation on the wireless industry. Ironically, at the same time the 
industry has been deploying national networks and offering national 
rate plans that offer unparalleled benefits for consumers, states 
threaten to undermine these benefits by imposing a patchwork of 
burdensome and inconsistent rules. Left unchecked, these re-regulatory 
efforts will force wireless carriers to follow different rules in 
different states and undo the benefits of deregulation--a result 
antithetical to Congress' goal in 1993. We have some states attempting 
to dictate the contents of our bills--an effort that will inevitably 
lead to varying, inconsistent requirements in different states. In 2005 
alone, 18 states attempted to impose their own regulatory regimes on 
us. We have others attempting to control our rates, despite Congress' 
clear command in 1993 that the market, not public utility commissions, 
should regulate rates. Still other states are not taking any action. 
Exclusive federal oversight and regulation, where necessary to protect 
consumers, is the right approach for the wireless industry.
    Congress can simultaneously recognize the benefits of competition 
and prevent the harmful impacts of state-by-state regulation of a 
national industry by completing the deregulation began in 1993. The 
federal government is in the best position to oversee this national 
industry, which serves the public across and without regard to state 
lines. Verizon Wireless urges the Committee to clarify that the 
deregulatory provisions in Section 101 apply to all wireless services. 
This will help ensure that, as we and our competitors make further 
investments in national broadband services that benefit the public as 
they work and travel across the nation, we are regulated consistently, 
and at a national level.
    Conclusion: The Committee took the first step in 1993. You have a 
unique opportunity to build upon that success. Verizon Wireless hopes 
that as your legislative process continues, you keep in mind the 
technical complexities of the wireless network and allow us the freedom 
to maintain our network resources and the ability to secure our 
network. We look forward to working with you in this process.

    Mr. Upton. Thank you. You are going to hear the buzzers 
ring here in a second. We are about ready to have three votes, 
so I think at this time--yes. That is right. I think we are 
going to take a short recess, and we will come back at 12:35. 
We will begin with Mr. Willner at 12:35.
    [Brief recess.]
    Mr. Upton. I hope you got lunch.
    Mr. Willner. No.
    Mr. Upton. We didn't either.
    Mr. Willner. We are equally hungry.
    Mr. Upton. I would have said one if I had known those three 
votes would have taken a little bit longer. Mr. Willner?

                 STATEMENT OF MICHAEL S. WILLNER

    Mr. Willner. Thank you, Mr. Chairman, and the rest of the 
members of the subcommittee, and thank you for inviting me to 
speak on behalf of the National Cable and Telecommunications 
Association. I am pleased to address the issues surrounding the 
BITS bill.
    Ladies and gentlemen, I will remind you once again, it is 
the cable industry that has invested more than $100 billion to 
bring new and advanced 21st Century services to millions and 
millions of American homes, and we did so without any 
government handouts. We agree with you that new technologies 
like IP are changing the competitive landscape for all 
communication services. A fresh look at the regulatory 
framework established in 1996 is indeed in order, but we are 
concerned about the bill's technology specific focus.
    If Insight's chief technical officer has to check with a 
barrage of regulatory lawyers before he decides to add new 
features and functions to our network, that would stifle 
innovation. If a technical design of our network determines how 
we are regulated, that will skew investment toward technologies 
that meet regulatory rather than marketplace demands. How is 
that good for consumers?
    We believe that any review of current law should be guided 
by three basic principles. First, like services should be 
treated like, and all providers of those services should play 
by the same rules. What matters to consumers is not the 
technology used to provide services, but the services 
themselves. Second, there should be minimal economic 
regulation. Cable's investments in digital television, 
broadband, and VoIP did not require the carrot of regulatory 
benefits, just the promise of new customers signing on for the 
service. And finally, we believe that local governments have an 
important role to play in ensuring that video service providers 
make services available to all citizens in a timely and fair 
fashion.
    Unfortunately, the current draft creates different 
regulatory regimes for like services. Regulatory treatment 
would turn on whether a provider uses packet-switch 
transmission or not, whether particular offerings are--and I am 
going to quote--``subsumed in or subsuming'' others, and 
whether a customer can ``integrate'' ``customizable voice and 
data capabilities'' with ``two-way'' video programming. You 
know, sitting here today, I don't think any of us in this room 
has the same idea of what all those terms mean.
    There are two dangers with having the government picking 
technology winners and losers, particularly in a field as 
rapidly changing as telecommunications. The initial technology 
choice may be wrong, and government cannot anticipate what is 
just around the corner. For example, the FCC came close to 
mandating analogue high-definition television in the 1980's, 
and 30 years earlier chose a color television standard that was 
incompatible with existing black and white televisions before 
reversing itself. That probably significantly slowed down the 
development of color TV. 10 years ago, ATM and ISDN were hot 
transmission protocols, but mandating them would probably have 
prevented the rise of IP and today's Internet as we have grown 
to know it.
    Technology is not relevant to drawing regulatory 
distinctions among multi-channel video distributors. Many of 
the services and features SBC identifies as IP-based are 
provided already by cable companies without using IP, including 
subscription video on demand, multiple camera angle viewing of 
live sporting events, live traffic, weather reports. Cable 
operators will undoubtedly increase the use of IP. We already 
use it in certain applications. But the competitive market, not 
the regulatory environment, should prompt that action.
    The draft bill also creates more regulation at a time when 
competition should result in less regulation, adding three new 
silos to the existing ones for voice, video and data, means 
that providers could fall into 1 or more of 6 different 
regulatory categories. I am particularly concerned about the 
bill's first-time ever regulation of Internet access services 
in the form of net neutrality. In the absence of any evidence 
that cable operators have or are blocking customer access to 
content, a government mandate is indeed premature. The open-
ended nature of this unnecessary mandate will definitely trap 
broadband providers into a morass of litigation for years to 
come.
    The cable industry has always worked closely with this 
committee, and we stand ready to work with you to craft 
revisions to the Telecommunications Act that reflect not only 
today's realities, but also anticipates tomorrow's 
developments.
    You know, I will tell you, as a cable operator in States 
like Indiana and Kentucky, you learn a lot about basketball, 
and one thing I have learned is that whether you are a Hoosier 
fan or a Cats fan, nothing makes both sides more angry than the 
referees deciding who is going to win the game. It should be 
the players on the field. And with this draft, I am afraid that 
Congress is becoming dangerously close to wearing a black-and-
white striped shirt--vertical striped shirt, as the referees in 
this game.
    Thanks again for inviting me to testify. I will end it on 
that note.
    [The prepared statement of Michael S. Willner follows:]
 Prepared Statement of Michael S. Willner, President and CEO, Insight 
                             Communications
    Mr. Chairman and Members of the Subcommittee, thank you very much 
for inviting me to speak with you today on behalf of the National Cable 
& Telecommunications Association regarding the new discussion draft 
legislation addressing Internet Protocol (IP)-enabled and broadband 
services.
    As you know, the cable industry has invested significantly--more 
than $100 billion since 1996 and nearly $10 billion this year alone--to 
bring advanced video, high-speed Internet access, and now voice 
services to tens of millions of Americans across the country. My own 
company, Insight Communications, has invested hundreds of millions of 
dollars upgrading and building systems in the last eight years. 
Broadband is virtually rolled-out to all areas served by the company. 
Four markets have circuit-switched telephone service and the rest are 
in the process of rolling-out IP telephony. Cable therefore has a 
fundamental stake in the ongoing efforts to revise the Communications 
Act.
    The discussion draft is an ambitious effort to devise a national 
framework for advanced voice, video, and data services. NCTA agrees 
with you and others on the Committee that new technologies like IP are 
changing the competitive landscape for all communications services. The 
use of IP, for example, can facilitate true intermodal competition in 
all services. The transition from analog to digital video, while not 
yet complete, is already providing consumers with a more robust array 
of services and the ability to customize what they watch and when. 
Other technological developments will offer the ability to access 
content and information anywhere.
    Given the scope and pace of these advances, it is appropriate to 
take a fresh look at the regulatory framework established in 1996--not 
in order to codify a particular technology as the touchstone of policy, 
but to reform and hopefully reduce regulation for all providers in way 
that does not impede future advances. With respect to multichannel 
video in particular, competition warrants a comprehensive re-
examination of the existing regulatory framework adopted more than 20 
years ago when the video marketplace was far less competitive.
    While we agree that a fresh look at regulation is needed, we have 
serious concerns with the direction and approach of the draft bill. In 
particular, it treats functionally equivalent services differently, 
conferring a regulatory advantage on particular technologies. Rather 
than simply deregulate where market forces warrant, the bill erects a 
complex new scheme for IP-based and other ``integrated'' services. 
Regulatory treatment will turn on whether a provider uses packet-
switched transmission or not; whether particular offerings are 
``subsumed in or subsuming'' others; and whether a customer can 
``integrate'' ``customizable voice and data capabilities'' with ``two-
way'' video programming. The bill is also overregulatory, including 
first-time-ever regulation of the Internet in the absence of market 
failure that might justify that regulation.
    The uncertainties inherent in this approach and the government 
micromanagement it invites are unlikely to provide the stable 
regulatory framework that promotes investment and innovation. By 
contrast, when Congress largely eliminated economic regulation of the 
cable industry in 1996 and largely got out of the way of our broadband 
deployment, cable responded with $100 billion in new investment and an 
array of advanced services that consumers have embraced.
                  principles for reviewing current law
    We believe that any review of current law should be guided by three 
principles.
    First, like services should be treated alike, and all providers of 
those services should play by the same rules. What matters to 
consumers, and what should matter to policymakers, is not the 
technology used to provide services, but the services themselves.
    Second, there should be minimal economic regulation, allowing 
competition to rely on market forces wherever possible. The market has 
worked well to ensure that new developments enabled by technological 
advances and the integration of advanced services reach consumers. 
While the Bell companies have touted the integrated features they will 
offer if granted favorable regulatory treatment, cable offers those 
services and features today--and did so as soon as the market showed 
interest, regardless of regulatory benefit.
    For example, just last week, Sprint Nextel, Comcast, Time Warner 
Cable, Cox Communications and Advance/Newhouse Communications announced 
the formation of a joint venture, designed to accelerate the 
convergence of video, wireline, wireless and data communications 
products and services and bring exciting new capabilities to 
subscribers. Customers will be able to purchase a ``Quadruple Play'' or 
any combination of services, have access to a wireless ``third 
screen,'' and enjoy other features that integrate cable and wireless 
services all on a single device. Time Warner customers in some markets 
today can have a caller ID flash on their television screens when they 
get a telephone call. Cablevision customers can check their home 
voicemail from any Internet connection in the world.
    The market has responded well to the new services cable offers. 
There are over 26 million digital cable customers--up from 12 million 
in 2001. Upgraded cable systems can offer telephone service over the 
same cable line that already carries digital video, high speed 
Internet, and other advanced services to consumers. As of the end of 
the Second Quarter of 2005, major MSOs--including Insight, Cox, 
Charter, Comcast, Cablevision, and Time Warner, along with other cable 
operators--served approximately 4.4 million residential cable phone 
customers across the country.
    These developments did not require regulatory prompting; they were 
driven by market demand. Companies facing fierce competition will 
respond to what consumers want, as providers continuously seek to 
differentiate themselves and their products and services. Their 
response should not be driven, or even affected, by a need to fit a 
service into a particular regulatory box. A regulatory scheme that 
successfully encourages innovation will not require providers to spend 
time debating which side of the line a service feature puts them on.
    Finally, certain universally recognized social responsibilities 
must remain in place for all providers of communications services. In 
the context of voice services, those responsibilities include 911 and 
E-911, cooperation with law enforcement, and support for universal 
service within a competitively neutral regime. On the video side, new 
services and features should not be developed for, and available to, 
just the wealthiest subscribers--it should be an important part of the 
role of all providers to ensure that their service reaches every 
segment of society. While regulation should be no greater than what is 
necessary to ensure the fulfillment of those responsibilities--and 
there is room to make them consistent across providers--these important 
public protections should not be abandoned.
                   concerns with the discussion draft
    Measured against these objectives, the discussion draft raises a 
number of concerns.
    First, the draft bill creates different regulatory regimes for like 
services based on technological distinctions. There are two dangers 
with having the government picking technology winners and losers, 
particularly in a field as dynamic as communications--the initial 
technology choice may be wrong, and government cannot anticipate what's 
around the corner. A technology-based approach creates a perverse 
incentive for providers to select the technologies they use based on a 
particular regulatory result even if they do not necessarily respond to 
consumer demand most effectively and efficiently, and it may lock them 
into particular technologies long after those technologies have 
outlived their usefulness.
    It wasn't too many years ago, for instance, that this Committee was 
close to endorsing an analog version of HDTV that would have required 
as much as 12 megahertz of bandwidth for each video channel. 
Fortunately, digital technology emerged quickly enough to prevent 
enactment of that policy. Another example from history, this one 
involving a transmission technology, is perhaps even more relevant to 
the current effort. Ten years ago, asynchronous transfer mode (``ATM'') 
was considered a primary protocol for networks (strongly promoted by 
the telephone companies), and IP was thought to be not as applicable 
for the transmission of data. If Congress had mandated ATM, it would 
have dramatically slowed the growth of the Internet, and IP's growth 
would have been hampered.
    A more current example that shows the flaws of technology-based 
regulation is the use of IP to deliver video programming. Some have 
argued that IP video should be subject to a new regulatory regime, but 
the fact is that cable operators already use IP transport at various 
points in their networks, including cable modem service and backbone 
networks. There is no technical limitation to cable operators adopting 
IP technologies in their retail video services. Such services are being 
field tested by Time Warner in San Diego and are being studied by the 
engineering departments of all of the major multiple system operators, 
including Insight.
    SBC has also proposed to use IP in its video distribution network, 
reportedly to transport and deliver video to the customer premises. At 
least in part, this appears to be a function of the limited bandwidth 
available to SBC over its existing copper facilities to transmit video 
to the home, which required SBC to find a means to deliver only a few 
channels at a time to the customer rather than all channels as cable 
has traditionally done. Significantly, many of the services SBC 
identifies as IP-based are being provided by cable companies today 
without using IP, including subscription video-on-demand service, 
multiple camera angle viewing of live sports programs, live traffic and 
weather feeds.
    The point is that as it becomes useful to introduce IP (or any 
other new technology) into the distribution of video services, all 
providers, including current cable operators, will do so. The 
regulatory scheme should be structured to encourage, not interfere 
with, that natural progression. By contrast, a law that favors 
particular technologies over others will skew this progression and 
risks deterring innovation and undermining efficiency. Government 
should not be in the business of picking technology winners and losers. 
That should be left to the market.
    The same danger arises if Congress anoints a particular service for 
favorable regulatory treatment, as the discussion draft does with 
broadband video. The features and functions that policymakers demand 
may not be the same ones that the marketplace wants. In the interest of 
favorable regulatory treatment, providers may end up devoting 
significant resources to developing services that consumers have no 
interest in. In that case, providers and consumers lose. The market, 
not the government, should drive the course of innovation and 
investment.
    Second, the draft bill favors regulation over market forces. 
Indeed, it complicates the existing regulatory framework by adding 
three new regulatory ``silos'' in addition to the existing ones for 
voice, video, and data. Providers could fall in one or more of six 
different regulatory silos, each with different, and not always 
consistent, responsibilities. With regard to video, the bill's 
``broadband video service'' would be the fifth category of multichannel 
provider--after cable, DBS, wireless cable, and open video systems--
exacerbating rather than simplifying the current existing competitive 
imbalance among such providers.
    With respect to broadband services, the bill appears to impose 
forced access obligations on facilities-based Internet access 
providers, overturning the Supreme Court's Brand X decision and the 
FCC's recent Wireline Broadband Order. Forcing facilities-based 
providers who have chosen not to hold themselves out as common carriers 
to share their facilities with competitors will deter investment in new 
networks. By interfering with the property rights of those providers, 
it also raises a significant takings issue. While perhaps inadvertent--
the problem arises from the fact that the definition of BITS now 
encompasses both the offering of ``pure'' transmission as well as 
Internet access service--it is an issue that need not be reopened at 
all.
    What is not inadvertent is the first-time-ever regulation of 
Internet access services themselves in the form of a ``net neutrality'' 
requirement. While the recent revisions to the bill, such as allowing 
BITS providers to take reasonable measures to protect network 
reliability, impose some limits on this regulation, there remains a 
grave danger that these regulations will lock providers into certain 
business or technology arrangements and hamper their ability to respond 
to market needs.
    In particular, what constitutes ``impair[ing]'' or ``interfer[ing] 
with'' the use of content or services would be the source of constant 
litigation or the threat of litigation, creating a persistent and 
deadening overhang to the deployment of broadband services. Anyone 
unhappy with the terms of their business deal with a broadband provider 
would inevitably race to the FCC or the courthouse alleging a 
violation. Given the inherent open-endedness of concepts like 
``impairment'' or ``interference,'' a provider would have no way of 
knowing whether the practice complained of will be found to be 
reasonable or an instance of unlawful interference. Under such a 
scheme, providers will have little incentive to innovate or to 
differentiate themselves in the marketplace.
    The fact is that nearly everyone in the industry engages in some 
activity that arguably would fall under the bill's definition of 
``interfer[ence]'' with content or access. For example, several years 
ago, in an effort to discourage the posting of commercial messages 
(``spam'') on its multiple message boards, Yahoo! adopted a policy of 
blocking access to Web addresses advertised in spam messages. While 
some viewed this as a consumer-friendly move, others suggested that 
Yahoo!'s motive was to hinder competitors--and, in fact, Yahoo 
acknowledged that ``some of the Web sites . . . blocked from its 
finance section [were] competitors.'' Yahoo! and other web portals also 
have agreements with certain content providers to feature their content 
or links to particular sites. Microsoft requires people to use Internet 
Explorer to view streaming video on its MSNBC web site. If the 
government installs itself to police these kinds of business 
arrangements, it will seriously compromise the ability of network and 
content providers to devise new offerings and respond to market 
demands.
    Finally, with respect to matters where continued regulation is 
necessary, particularly in the area of interconnection between new 
broadband networks and the public switched network, the staff draft 
does not provide sufficient safeguards. While the cable industry 
generally supports reducing regulation, the public switched network 
presents a special case: since the vast number of voice customers will 
use that network for the foreseeable future, no voice competitor can be 
successful unless its subscribers can terminate calls to that network 
and receive calls that originate on it.
    There is, very simply, nothing quite like the public switched 
network. DBS operators did not need to interconnect with cable systems 
to compete (Congress did conclude that they needed access to cable 
programming, however), and the ``network of networks'' architecture of 
the Internet is distributed rather than centralized. So long as the 
PSTN maintains its unique position for voice services, however, the 
Bell companies who control it will have a correspondingly unique 
incentive and ability to frustrate competition by impeding 
interconnection with other voice providers, regardless of whether those 
providers use IP or some other technology. New entrants, by contrast, 
lack the incumbents' customer base and bottleneck control. As Congress 
recognized in 1996, interconnection with the incumbents must be 
available on just, reasonable, and nondiscriminatory rates, terms, and 
conditions if broadband competition is to succeed.
                        an alternative approach
    The starting point for reform of our communications laws should be 
to identify the problem that needs to be fixed and then to develop a 
focused response. Legislation focused on IP or any other particular 
technology sidesteps this fundamental question and, as I've suggested, 
will skew investments and inevitably become obsolete.
    The communications marketplace is changing before our eyes, almost 
weekly. Entrepreneurs, inventors, service providers, and investors are 
not waiting for legislation to point the way to the next big thing. 
What is needed is a regulatory framework that recognizes these 
changes--and the sheer pace of change--by streamlining existing law 
where there is competition and by giving the FCC the tools to adapt the 
remaining requirements to new competition as it develops. The current 
environment offers the opportunity to reexamine and reevaluate all 
current regulation of voice, video, and data and remove barriers or 
burdens that are unnecessary because of the enhanced competition that 
IP and other technologies make possible.
    For those regulations deemed necessary to retain at this time, 
legislation could set a clear path for their reexamination and removal 
as they, too, become outmoded. The FCC's forbearance authority could be 
extended beyond telecommunications services and the Commission could be 
required to forbear from all unnecessary regulation, taking into 
account competition from functionally equivalent offerings, regardless 
of technology or regulatory classification. Of course, any new 
framework should also ensure that providers continue to fulfill 
important social responsibilities.
    We believe that this approach, designed to reflect the new 
competitive world and grow with it, would far better serve the needs of 
competitors and consumers than the approach suggested in the draft 
bill. To the extent the Committee intends to pursue the approach 
outlined in the draft bill, however, we would offer the following input 
about the draft provisions.
                     specific comments on the bill
    Above I outlined our general concerns with the discussion draft. 
More detail on each of these concerns follows below.
Like Services Are Not Treated Alike
    As noted above, we have serious concerns with subjecting services 
that are functionally the same to different--and in some cases, very 
different--regulatory treatment. The draft bill is built on technology-
specific distinctions that may not have real relevance in the 
marketplace or enhance competition or functionality. By way of example:

 packet-switched transmission is subject to the bill, while circuit-
        switched transport is subject to existing law;
 the definition of ``packet-switched service'' appears to require the 
        separate routing of every packet, but not all packet-based 
        protocols perform routing functions for every packet;
 requirements applicable to a BITS provider are limited to facilities-
        based providers, placing such providers at a competitive 
        disadvantage vis-a-vis non-facilities-based broadband 
        providers, such as Microsoft, Yahoo!, eBay, and other ``edge'' 
        providers (in addition to Earthlink and other ISPs), who are 
        mounting competitive challenges to facilities-based 
        communications providers;
 the bill excludes ``any time division multiplexing [TDM] features, 
        functions, and capabilities'' from the definition of BITS, even 
        when the service (such as cable modem, DSL and FTTH) utilizes 
        TDM and TCP/IP;
 there are different interconnection rules for VoIP providers and 
        providers of conventional telephone service; and
 the bill foresees the use of ``successor protocol[s]'' only to ``TCP/
        IP'', but TCP is only one of many IP protocols.
    In each of these cases, there does not appear to be any rational 
basis for selecting only certain IP technology for favorable treatment, 
when the service being provided may or may not benefit from that 
technology and the subscriber may or may not even know it is being 
used. We believe the bill should eliminate such distinctions.
    Similarly, under the draft bill, broadband video service must be 
offered in a manner that allows subscribers to ``integrate'' the video 
aspects of the service with ``customizable, interactive voice and data 
features,'' even if a subscriber never uses these features and receives 
only video programming service that looks exactly like a cable service. 
The draft bill also removes certain obligations only from broadband 
video service, rather than consider whether they no longer make sense 
for any provider of multichannel video.
    Many of NCTA's members may already be offering ``broadband video 
service'' as it is currently defined and would therefore qualify for 
and benefit from some or all of the bill's favorable regulatory 
treatment. As noted above, some cable systems have integrated their 
video and telephony service features to allow television viewers to 
receive caller ID on their television screens.
    Whether or not a cable company's offering meets the definition of 
broadband service--and the myriad undefined attributes of this service 
make it impossible to know for sure--we do not believe the bill's 
approach provides a sound foundation. While it is true that all 
``broadband video service providers'' would be treated the same, in 
fact broadband video providers would be treated differently from cable 
operators against whom they compete solely on the basis of 
technological distinctions like the ``integration'' of ``customizable, 
interactive'' voice and data features. Even if customers forgo those 
features in favor of multichannel video that is functionally 
indistinguishable from cable service, the broadband video service 
provider retains its regulatory advantage over a cable operator.
    In an industry as dynamic as video, moreover, technology-based 
distinctions will rapidly become obsolete. Any new legislative 
framework should be able to guide industry and government through 
changes in technology. The discussion draft, by contrast, will likely 
need to be amended even before it passes into law to account for new 
development that will inevitably emerge in the coming months. 
Competitive forces should and will propel providers to use the 
technologies that enable them to offer the services and features 
consumers want. Government interference in that natural process is far 
more likely to hinder than encourage this result.
The Bill is Overregulatory
    We also believe the draft bill unnecessarily imports too much 
traditional utility regulation to competitive broadband services. It 
imposes numerous requirements on VoIP, BITS and broadband video 
services even where the competitive need to attract customers to these 
new services has proven sufficient to discipline competitors' conduct, 
and no market failure justifies a change in regulatory treatment. While 
the consumer protection standards in the discussion draft have been 
narrowed, for instance, they remain overbroad. The result is the 
imposition of extensive new and burdensome regulatory requirements for 
services that have flourished without government involvement and 
without any demonstration of market failure. Truth-in-billing and other 
requirements--many of which have served as vehicles for unwarranted 
class action lawsuits--are unnecessary, particularly if providers 
remain subject to State laws of general applicability. In some cases, 
such as the bill's privacy and disabilities' access requirements, the 
draft imposes even stricter standards on broadband providers than those 
imposed on traditional providers.
    By defining BITS to include Internet access service, moreover, the 
bill would impose these obligations, along with federal registration 
obligations and other utility-style requirements designed for monopoly 
common carriers, on facilities-based Internet access providers such as 
cable who only recently won the right to be free from regulation.
    By far the most extreme example of unnecessary regulation, however, 
is the imposition of so-called ``net neutrality'' requirements on BITS 
providers. As discussed above, we believe the net neutrality 
requirement is a solution in search of a problem and would represent an 
unprecedented regulation of Internet services. Cable operators are not 
blocking consumers' access to Internet content, applications, or 
services or restricting the attachment of customer equipment. Although 
there have been claims that cable could use control of its broadband 
network to act anticompetitively, there has been only a single unproved 
allegation that a cable operator has done so. The cable broadband 
network is also designed to accommodate any gaming devices, or any 
other computing device the customer wants to use. Cable companies have 
no incentive to block content, applications, or services and thereby 
drive customers to DSL, satellite broadband, or other competitors 
waiting in the wings.
    The harm to society from a net neutrality requirement would vastly 
outweigh any potential benefit. Requiring cable operators to offer 
cable Internet service in a particular way may lock them into business 
or technology arrangements that prevent them from responding to 
customers' changing interests or marketplace reality. As I explained 
earlier, a broad requirement ``not to block, impair, or interfere with 
the offering of, access to, or the use of any lawful content, 
application, or service'' will open the door to a constant stream of 
complaints from cable's competitors dissatisfied with the terms of 
proposed business arrangements and seeking to use government 
involvement as leverage in their negotiations with cable companies.
    Nearly every commercial arrangement between facilities-based 
Internet service providers and Internet content providers could be 
challenged as ``impairing'' access to competing content, effectively 
precluding cable operators from enhancing the value of their Internet 
access service. Hearing and resolving complaints would tie up scarce 
government resources and impose substantial uncertainty in the industry 
at the time when it needs regulatory stability to develop this new 
business.
    If the requirement that providers allow subscribers to ``connect 
and use devices of their choosing in connection with BITS'' is 
retained, the bill should clarify that the subscribers' right is 
limited to, for example, the right to connect any device to the cable 
modem and does not allow uncertified cable modems or other uncertified 
devices to be connected directly to the cable network. Manufacturers of 
devices that connect to a cable modem must bear a reasonable 
responsibility to ensure that their equipment evolves and is compatible 
with new network technologies such as VOIP. Networks cannot and should 
not be required to evolve--or hold back on use of a new technology--to 
suit the specifications of individual equipment manufacturers.
    The discussion draft could also be read to impose new and 
unnecessary interconnection obligations on any cable operator that 
offers cable modem service, requiring them to agree to interconnection 
demands from telecommunications carriers and private (BIT) networks, as 
well as other BITS providers. Without any government mandate, cable 
operators have entered into peering arrangements to enable their cable 
modem customers to reach any site or person on the Internet. There is 
no need to turn this market-driven practice into a government mandate 
or to require cable operators to interconnect their broadband 
facilities to every other network.
The Bill Lacks Adequate Safeguards Against the Exercise of Market Power
    While overregulatory in certain regards, in other respects the 
discussion draft omits critical safeguards. In particular, the bill 
eliminates many of the regulations that were instituted specifically 
because competition proved insufficient to protect against the unfair 
exercise of market power, even where market conditions have not yet 
changed in a manner that would justify a change in law. For example:

 The bill does not require incumbent carriers that control Internet 
        backbone facilities to provide access to those facilities on a 
        just, reasonable and nondiscriminatory basis. Telephone 
        companies that both control Internet backbone facilities and 
        offer retail Internet access in competition with cable 
        operators have the incentive and the ability to discriminate 
        against cable operators in the rates, terms, and conditions 
        under which Internet backbone service is provided.
 The bill does not ensure that VoIP providers can interconnect with an 
        ILEC at any technically feasible point.
 The bill does not ensure that VOIP subscribers' listings will be 
        included in the ILEC directories (including those of 
        independent telephone companies as well as the Bells).
 The bill lacks clear standards for facilities-based VoIP providers to 
        interconnect with ILECs or provide any meaningful government 
        oversight of these interconnection negotiations. ILECs will 
        continue to provide service to the vast majority of households 
        for the foreseeable future. Without standards and a supervisory 
        mechanism in place, ILECs will have every incentive to delay or 
        impede negotiations for the exchange of traffic with VOIP 
        providers. The elimination of oversight by the FCC or State 
        Commission heightens this danger even further.
 The bill does not guarantee VOIP service providers' right of access 
        to pole attachments at nondiscriminatory rates, terms and 
        conditions.
    Nor does the bill provide for effective enforcement of the 
prohibition on redlining practices by BVS providers, despite 
indications that some competitors seeking to enter the market intend to 
deploy service based on the income of area residents. By placing the 
obligation on the FCC to oversee and resolve every allegation of local 
redlining by a broadband video service provider in every municipality 
in the country, the bill effectively frees BVS providers of any 
oversight, since the FCC clearly is not equipped with staff or 
resources to undertake such a role. Complaints would not be resolved in 
a timely manner, allowing the provider ample opportunity to benefit 
significantly from its discriminatory policies. Further weakening the 
prohibition is the fact that the bill allows providers to self-define 
their own service areas, allowing them to cherry pick wealthy 
communities for their service rollout.
    We urge the Subcommittee to consider the important role that local 
governments can play in overseeing the deployment of multichannel video 
systems. While the discussion draft preserves local authority over 
rights-of-way, local governments should also be able to ensure that all 
of their citizens receive service in a timely and fair fashion, that 
services meet community needs, and that customer service standards are 
met.
As a Whole, the Bill Creates Substantial Regulatory Uncertainty
    The sheer scope of the discussion draft and the undefined nature of 
many of its core provisions mean that, if enacted, it will inevitably 
result in protracted legal battles, significantly diminishing the 
likelihood that the bill will succeed in its goal of successfully 
moving communications policy into the Internet era. In many aspects, 
the bill actually appears to be a step backwards.
    For example, as noted above, the bill seems to overrule both Brand 
X and the FCC's recent DSL order by subjecting BITS providers to a 
forced access requirement. The cable and Internet access industries 
have only just finished years of litigating this issue. Likewise, the 
telecommunications industry has just finished years of litigating the 
UNE and interconnection provisions of the 1996 Act. Communications 
companies cannot focus resources and efforts on developing new services 
and technologies when the regulatory bar keeps changing. They cannot 
face ten more years of litigation. Any rewrite must make it the highest 
priority to provide clear guidance and regulatory stability, so that 
all industry members may take the necessary steps to bringing new 
offerings to consumers.
    Thank you again for the opportunity to appear before you today. The 
cable industry stands ready to work with you and your colleagues to 
craft revisions to the Communications Act that reflect today's 
realities and tomorrow's developments. I look forward to your 
questions.

    Mr. Upton. Mr. Yager?

                    STATEMENT OF JAMES YAGER

    Mr. Yager. Thank you, Mr. Chairman, Mr. Markey, and members 
of the subcommittee. I am here today on behalf of the National 
Association of Broadcasters, and as the owner and operator of 5 
mid-sized television stations in markets like Flint, Michigan; 
Quincy, Illinois; Columbia-Jefferson City, Missouri; and 
Amarillo, Texas.
    Television broadcasters believe that technology and 
business models being discussed today will inject much needed 
competition into the multi-channel video marketplace. Enhanced 
competition will give broadcasters new platforms for 
distributing their local programming. That is good for our 
viewers and good for your constituents. It gives them more 
options. So we support the committee's effort to spur 
competition.
    However, as the committee moves forward, we urge you to be 
mindful of your long standing goal of promoting localism by 
preserving a vibrant system of free over-the-air local 
television. I don't think anybody disagrees, local television 
is part of the very fabric of communities across this country. 
Viewers rely on our stations for local news, sports, weather 
and political coverage. Before, during and after disasters, 
over-the-air television provides a lifeline of emergency 
information. So as Congress develops the ground rules for IP 
video, the policies that promote localism today should also 
govern the relationship between broadcasters and video over 
broadband providers. When Congress enacted the 1992 Act, it was 
concerned that video distributors have an incentive to delete, 
reposition, or even refuse to carry local stations. Congress 
also acknowledged that a vibrant over-the-air system requires 
access to cable households. With these concerns in mind, 
Congress crafted the current must-carry retransmission consent 
system.
    This two-sided coin has strengthened localism. The must-
carry rules guarantee that even the smallest station in the 
most remote market is not blocked out of cable households. The 
flip side of the coin is retransmission consent. It recognized 
that cable operators derived great benefits from local 
broadcast programming. So the 1992 Act gives stations the 
option to negotiate carriage terms with cable operators. 
Together, the retransmission consent and must-carry laws have 
been a win-win for both viewers and for local television. It 
therefore makes sense that must-carry and retransmission 
consent should be applied equally to video broadband providers.
    Other rules are important to localism and also must be 
preserved. Congress has long recognized network affiliate 
stations rights to be the exclusive provider of network 
programming in their markets. Congress and the Commission have 
acknowledged the importance of stations' exclusivity for 
syndicated programs. Local advertisements sold by stations 
during network programming, like 60 Minutes, or Lost, and 
during syndicated programming like Oprah Winfrey, fund local 
programming, and local news, and local weather, and local 
sports.
    Mr. Chairman, as NAB testified in April, Congress developed 
this framework to ensure that cities as large as New York and 
as small as Marquette, Michigan, can have their own unique 
broadcast voices. Unfortunately, the staff draft would put 
these principles in continual jeopardy by requiring that rules 
be reviewed unnecessarily and potentially rolled back every 4 
years. Why do laws like must-carry that Congress enacted in 
1992, that have been reaffirmed not once, but twice, by the 
Supreme Court, and that have benefited millions of viewers, 
suddenly need to be defended every 4 years? This will only 
inject uncertainty into the market and unduly harm viewers.
    The notion that the FCC might repeal retransmission consent 
while leaving in place the cable compulsory license is 
particularly troublesome to broadcasters. Absent retransmission 
consent, a video transmission would simply take a broadcast 
signal and profit from it. Meanwhile, the government would set 
the rate by which the broadcaster is compensated, and the 
station would never have the opportunity to negotiate its 
carriage terms. Under the staff draft, broadcasters would face 
this specter every 4 years.
    Setting aside the 4 year review process, the staff draft 
has other shortcomings. Many of the ground rules that apply to 
cable, like must-carry and retransmission consent, are in 
statutory form. The staff draft orders the FCC to create 
supposedly parallel rules for the new broadband services, but a 
statute is a statute and a regulation is a regulation, and we 
all know statutes are much stronger than regulations. They 
provide certainty. What is in statute for cable should also be 
in statutory form for the new video distributors.
    Mr. Chairman, our industry and your constituents stand to 
gain much through enhanced competition in the video 
distribution market. We are ready to work with the committee in 
achieving that goal, while simultaneously strengthening 
America's system of free local over-the-air television. Thank 
you.
    [The prepared statement of James Yager follows:]
Prepared Statement of James Yager, Chief Executive Officer, Barrington 
                          Broadcasting Company
    Thank you, Mr. Chairman, for the opportunity to appear before the 
Subcommittee on Telecommunications and the Internet today. I am James 
Yager, Chief Executive Officer of Barrington Broadcasting Co., 
testifying on behalf of the National Association of Broadcasters (NAB). 
NAB is a nonprofit incorporated association of radio and television 
stations and broadcast networks, which serves and represents the 
American broadcasting industry.
    The television broadcast industry is pleased to be testifying about 
the proposed legislation, which is intended to encourage the deployment 
of new and innovative Internet services such as broadband video 
services. Broadcasters see great promise in what this new video 
distribution platform will offer. Broadband video services have the 
clear potential to introduce much needed competition into the 
multichannel video programming distribution market. We generally see 
this as a positive development for consumers, broadcasters and other 
program providers.
    As we embrace new technologies, however, it is vital that the 
legislation adopted continues to recognize the fundamental policy of 
localism that underlies our American broadcasting system and the 
importance of maintaining a robust system of local, over-the-air 
television. Congress, the Federal Communications Commission (FCC) and 
the courts have all explicitly recognized that public access to 
healthy, free over-the-air broadcasting is an important federal 
interest. For this reason, NAB submits that long-standing policies 
designed to promote localism, competition and diversity--including 
carriage and retransmission consent for local broadcast signals and the 
protection of local program exclusivity--must extend equally to all 
multichannel platforms. The proposed legislation needs to ensure that 
broadband video service providers are subject to requirements in these 
areas truly comparable to the requirements already applicable to other 
multichannel video programming distributors (MVPDs), such as cable and 
satellite operators. As presently drafted, however, the legislation 
fails to ensure that these important policies apply to new broadband 
service providers in the same manner as they apply to other MVPDs. The 
legislation also opens the door to premature elimination of these still 
needed national policies. NAB urges that the legislation be amended to 
correct these specific, limited problems.
The Deployment of Broadband Video Services Has the Potential to Benefit 
        Consumers and Programming Providers, Including Broadcasters.
    Television broadcasters generally support efforts to speed the 
deployment of new and innovative Internet services, including broadband 
video services. Particularly in light of continuing consolidation and 
increasing national and regional competition in the cable industry, 
1 a new video distribution platform offers great promise. 
Broadband video services have the clear potential to introduce much 
needed competition into the MVPD marketplace. We see this as a positive 
development for consumers, broadcasters and other program providers.
---------------------------------------------------------------------------
    \1\ In June 2004, the four largest cable operators served about 58 
percent of all U.S. cable subscribers. Eleventh Annual Report, Annual 
Assessment of the Status of Competition in the Market for the Delivery 
of Video Programming, 20 FCC Rcd 2755, 2763 (2005) (``Eleventh Annual 
Report''). This consolidation will only increase in the future, as 
Comcast and Time Warner are acquiring Adelphia's systems.
---------------------------------------------------------------------------
    Consumers may benefit from the development and deployment of 
another, competitive distribution platform capable of bundling a 
variety of services, including voice, Internet access and video 
services. With regard to video services especially, past studies have 
shown that competition from satellite providers has not been effective 
in restraining price increases for cable television. For example, the 
General Accounting Office (GAO) found that cable rates in markets with 
competition from a provider using a wire technology (such as local 
telephone company) were about 15 percent lower than cable rates in 
similar markets without wire-based competition. Competition from 
satellite operators did result in improved quality and service, but did 
not result in a significant lowering of cable television 
rates.2 The deployment of a new, competitive MVPD service 
may also benefit consumers by providing additional, diverse programming 
options.
---------------------------------------------------------------------------
    \2\ GAO, Issues Related to Competition and Subscriber Rates in the 
Cable Television Industry, GAO-04-8 at 9-11 (Oct. 2003). In 2004, the 
FCC reported, in markets where cable operators faced effective 
competition from wireline overbuilders, the average monthly cable rate 
and price per channel were, respectively, 15.7 percent and 27.2 percent 
lower than those averages for cable operators in communities without 
effective competition. Eleventh Annual Report, 20 FCC Rcd at 2773.
---------------------------------------------------------------------------
    Video programming providers, including broadcasters, may also 
benefit from the timely deployment of a new video distribution 
platform. The emergence of another platform for the distribution of 
video programming will provide programmers with an additional outlet 
for reaching viewers and therefore with greater opportunities for 
success in the marketplace. Some cable programming networks and 
regional sports networks have recently expressed concern to the FCC 
that large, consolidated cable operators are increasingly able to 
exclude independent programming networks from their systems and, thus, 
from the marketplace.3 The rapid deployment of a competitive 
video distribution platform could help ameliorate such problems.
---------------------------------------------------------------------------
    \3\ See, e.g., Petition to Deny of America Channel, LLC, MB Docket 
05-192 (filed July 21, 2005); Petition of TCR Sports Broadcasting 
Holding, LLP to Impose Conditions Or, in the Alternative, to Deny Parts 
of the Proposed Transaction, MB Docket 05-192 (filed July 21, 2005).
---------------------------------------------------------------------------
    Local television broadcasters may also similarly benefit from the 
emergence of another competitive MVPD service. A new video distribution 
platform will represent another outlet for broadcast programming, 
including local news and information. Given broadcasters' dependence on 
advertising revenue (and thus on reaching as many viewers as possible), 
the expansion of our opportunities for reaching consumers should be 
regarded as positive. The development of another video distribution 
platform for carrying broadcast programming would also encourage the 
development of innovative digital television programming, including 
multicast and high definition (HD) programming. If local stations feel 
confident that their HD and multicast programming will be carried by 
broadband video providers, broadcasters will be encouraged to make the 
substantial investments needed to bring their multicast service plans 
to fruition. In the end, it is consumers that will benefit by receiving 
a greater variety of programming, including local programming, from 
multicasting broadcast stations via a broadband service provider.
Policies Necessary for Preserving Free, Over-the-Air Local Broadcasting 
        Must Apply in the Same Manner to All MVPDs.
    As NAB has testified in the past, our American television system is 
an important part of our national identity.4 Unlike other 
countries that offer only national television channels, the United 
States has succeeded in creating a rich and varied mix of local 
television outlets that give individual voices to more than 200 
communities. But, local over-the-air TV stations--particularly those in 
smaller markets--can survive only by generating advertising revenue 
based on local viewership. If new technologies can erode local 
viewership by overriding program exclusivity rights of local stations 
and offering the same programs on stations imported from other markets, 
or effectively block their subscribers' access to local signals, the 
viability of local TV stations--and their ability to serve their local 
communities with high quality programming--could be lost.
---------------------------------------------------------------------------
    \4\ See Attachment, Testimony of Gregory Schmidt, Vice President of 
New Development and General Counsel for LIN Television Corporation, on 
behalf of NAB, before the House Commerce Committee, April 20, 2005 (NAB 
Testimony).
---------------------------------------------------------------------------
    Over the past decades, Congress and the Federal Communications 
Commission have adopted and maintained certain requirements on MVPDs to 
preserve localism and local station program exclusivity. These are the 
principles that underlie the policies of syndicated exclusivity, 
network non-duplication, must-carry and retransmission 
consent.5 As Congress has recognized, and the Supreme Court 
has upheld, preservation of our system of broadcasting is ``an 
important governmental interest.'' 6
---------------------------------------------------------------------------
    \5\ See NAB Testimony, pp. 3-10.
    \6\ Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622, 662-63 
(1994).
---------------------------------------------------------------------------
    Earlier this year, NAB explained in other congressional testimony 
why must carry, retransmission consent and local program exclusivity 
are more necessary than ever to maintain our system of locally-based, 
free over-the-air broadcasting and why these policies should be applied 
to new technologies such as video over broadband.7 Since 
that time, the FCC has again recognized the importance of the 
retransmission consent and program exclusivity policies and recommended 
to Congress that no changes be made.8 NAB incorporates that 
testimony and reemphasizes here today that these long-standing 
requirements that apply to traditional MVPDs such as cable and 
satellite operators should apply in a comparable manner to new 
platforms that provide comparable video services.
---------------------------------------------------------------------------
    \7\ NAB Testimony, pp. 2-12.
    \8\ Report of the FCC, Retransmission Consent and Exclusivity 
Rules: Report to Congress Pursuant to Section 208 of the Satellite Home 
Viewer Extension and Reauthorization Act of 2004 (Sept, 8, 2005).
---------------------------------------------------------------------------
The Proposed Legislation Fails to Apply Vital Regulatory Policies 
        Comparably to Video Broadband Providers and Permits the FCC to 
        Eliminate Long-Standing Policies Necessary to Preserve Our 
        System of Broadcasting.
    Section 304 of the proposed legislation purports to apply certain 
video regulations (including must carry, retransmission consent and 
program exclusivity) to broadband video service providers in a manner 
comparable to other MVPDs. As drafted, however, the legislation does 
not ensure that broadband video providers offering an MVPD service 
functionally equivalent to the services currently provided by cable and 
satellite operators will in fact be subject to comparable requirements. 
As drafted, the legislation prematurely gives the FCC broad discretion 
to eliminate, with regard to video broadband providers, long-standing 
policies necessary to preserve our system of free, locally-based over-
the-air broadcasting. It also may unintentionally grant authority to 
the FCC to undercut current statutory requirements on cable and 
satellite providers.
    As an initial matter, NAB notes that Section 304(a)(1) of the 
legislation directs the FCC to ``adopt for broadband video service 
providers comparable regulations as apply to'' MVPDs in a variety of 
areas, including must carry and retransmission consent. This language 
would create a disparity in that certain requirements (such as must 
carry and retransmission consent) will only be regulatory requirements 
for video broadband service providers, while these are statutory 
obligations for cable operators.9 Regulatory requirements 
are clearly not comparable to statutory requirements. It could be 
argued that the FCC could waive such a regulatory requirement, while it 
may not, of course, waive any statutory requirement adopted by 
Congress. Thus, the FCC could possibly waive important policies such as 
must carry on the request of a video broadband provider without 
appropriate Congressional input, while Congressional action is clearly 
necessary to alter such requirements for a cable operator. This cannot 
be deemed to constitute ``comparable'' regulation. To correct this 
inconsistency in regulatory treatment, the legislation should make 
statutory for broadband video providers any requirement that is 
statutory for other MVPDs.
---------------------------------------------------------------------------
    \9\ See 47 U.S.C. 325, 534, 535.
---------------------------------------------------------------------------
    Another provision of the draft legislation is even more troubling. 
Section 304(a)(2) permits the FCC to eliminate any of the regulations 
applicable to broadband service providers (including must carry and 
related policies) adopted pursuant to Section 304(a)(1) of the 
legislation.10 This provision will give the FCC virtually 
unfettered authority to overturn policies that Congress has previously 
determined to be essential for preserving the benefits of free, over-
the-air local broadcasting (especially for those who do not subscribe 
to an MVPD); for promoting widespread dissemination of information from 
a multiplicity of sources (particularly sources, such as broadcasters, 
not under the control of cable operators); and for promoting fair 
competition in the market for television programming.11 
While competition may eventually be sufficient to warrant some 
deregulatory modifications, it is not so evidently on the horizon that 
Congress should hand over its oversight of these important obligations 
to the FCC. To prevent the FCC from exercising this amount of undue 
discretion, the ``quadrennial review'' requirement in Section 304(a)(2) 
should be eliminated from the legislation.12
---------------------------------------------------------------------------
    \10\ Specifically, Section 304(a)(2) requires the FCC to review 
these regulations applicable to video broadband providers every four 
years and directs the FCC to eliminate those regulations to the extent 
the FCC determines they are no longer necessary as the result of 
economic competition.
    \11\ See Turner, 512 U.S. at 662-63 (finding that Congress adopted 
must carry to serve these three important governmental interests).
    \12\ NAB also notes that, in other contexts, quadrennial review 
requirements have not lead as expected to the elimination of 
regulations made unnecessary by increased competition, but has instead 
lead to extensive legal challenges of FCC actions and almost permanent 
legal uncertainty for communication service providers. For example, the 
FCC attempted, as statutorily required, to review the broadcast 
multiple ownership rules in 2002, but its revised rules were challenged 
in court. Most of these revised rules have consequently not gone into 
effect, but have been sent back to the FCC for further consideration 
and explanation. The FCC has not yet even begun this consideration of 
its 2002 review on remand, but is required by statute to conduct a new 
quadrennial review in 2006. There is no reason to believe that a 
quadrennial review process in the context of broadband service 
providers would operate any more efficiently or effectively.
---------------------------------------------------------------------------
    In addition, this legislation may unintentionally allow the FCC in 
the future to eliminate requirements such as must carry, retransmission 
consent and local program exclusivity even with regard to other MVPDs, 
such as cable operators. As cable operators continue to upgrade their 
facilities so they can offer broadband Internet services, two-way 
services and/or interactive services, they may arguably fall under the 
definition of a ``broadband video service provider'' in Section 2(a). 
In such case, Section 304(a)(2), which permits the FCC to eliminate 
regulations adopted for broadband video service providers, would 
potentially allow the FCC to eliminate the long-standing requirements 
regarding must carry, retransmission consent and program exclusivity 
even for those providers traditionally regarded as cable operators. 
This loophole could therefore undercut express statutory requirements 
for must carry and retransmission consent that Congress adopted for 
cable operators in 1992 in order to preserve our system of free, 
locally-based television broadcasting. The legislation should be 
amended so that cable operators cannot simply recategorize themselves 
as broadband video service providers and thereby do an end run around 
long-standing policies that Congress and the Supreme Court have 
recognized as important.
Conclusion.
    Broadcasters see great potential in the development of broadband 
video services to increase competition in the MVPD marketplace, thereby 
benefiting consumers, broadcasters and other program providers. 
However, in seeking to encourage the more rapid deployment of broadband 
video services, Congress should extend to this new multichannel 
platform long-standing policies that have successfully promoted 
competition and diversity in the video market for many years. As 
presently drafted, the proposed legislation fails to apply policies 
vital for the preservation of locally-based, free over-the-air 
broadcasting (including carriage and retransmission consent for local 
broadcast signals and local program exclusivity) to new broadband 
service providers in the same manner as they apply to other MVPDs. The 
legislation even permits the FCC unduly broad discretion to eliminate 
must carry and related policies that Congress has long believed were 
needed to maintain our system of television broadcasting. NAB urges the 
Subcommittee to amend this legislation to correct these specific, 
limited problems.

    Mr. Upton. Mr. Yager, I know you have been here before, 
which is why you were right on 5 minutes. It was perfect.
    Mr. Yager. Thank you, sir.
    Mr. Upton. Thank you. At this point, we are going to do 
questions from the panel. Again, I am going to be--try to be 
pretty honest with this--yes. Ms. Praisner, I know that there 
is not a copy of the draft, I don't think, in front of you----
    Ms. Praisner. There is.
    Mr. Upton. Oh, there is? Okay.
    Ms. Praisner. Yes, sir.
    Mr. Upton. Well, I want to talk a little bit about the 
franchise fees, which, of course, get passed along to the 
consumer on their monthly bills.
    Ms. Praisner. Right.
    Mr. Upton. If you look at the staff draft on page 30, 
beginning at line 14, Section 303d, as in David, it says this, 
``franchise fee assessment by local franchising authority 
permitted. The local franchising authority may collect a 
franchise fee from a broadband video service provider for the 
provision of broadband video service within the local franchise 
area of such authority. Amount (2), for any 12-month period, 
such franchise fee shall not exceed 5 percent of such broadband 
video service providers gross revenues in such period from the 
provision of broadband video service to subscribers in such 
local franchise area.'' And if you skip down to line 31, line 
10, it continues--the draft continues, it says, ``Definition of 
Gross Revenues.'' Maybe--I don't know if you have found it.
    Ms. Praisner. Page 31.
    Mr. Upton. Page 31, now, line 10.
    Ms. Praisner. Uh-huh.
    Mr. Upton. It says, ``For purposes of this subsection, the 
term gross revenues means all consideration of any kind or 
nature, including, without limitation, cash, credits, 
property''--means a lot--``in-kind contributions (services or 
goods) collected from the subscriber and attributable to the 
video programming package provided by the broadband video 
service provider as part of the broadband video service in such 
local franchising area.'' Now, based on what I just read, yes 
or no, would you acknowledge that the staff draft preserves by 
its very term the local franchising authority to collect 5 
percent of gross revenues collected from the subscriber that is 
attributable to the video programming package part of the 
broadband video service offering? Does it not say that? Yes or 
no.
    Ms. Praisner. It says that for the piece that it allows us 
to collect, but it does not allow that 5 percent to extend to 
all of the areas in which, under the cable franchises that we 
have now, there is the capacity to collect. So there isn't the 
advertising fees, the Home Shopping Network fees, whatever 
those----
    Mr. Upton. Property, in-kind contributions, cash, credit, 
et cetera. Let me talk about the PEG issue for a second.
    Ms. Praisner. Okay.
    Mr. Upton. Again, I would like you to read along with me, 
since you have got it there, from the text. On page 34, 
beginning at line 21, it talks about PEG, Public, Educational, 
Governmental use. ``Local franchising authority may designate 
broadband video service provider capacity for public, 
educational or governmental use in the local franchising area 
so long as such use is comparable to the obligations the local 
franchising authority applies, (1) to any cable operator in 
such local franchising area, and (2) in any other broadband 
video service provider in such areas.'' So, again, yes or no, 
based on what I just read, would you at least acknowledge that 
the draft does, by its very terms, permits a local franchise 
authority to designate capacity for PEG from a broadband video 
service provider which is comparable to that which a cable 
operator in the local franchise area is also providing?
    Ms. Praisner. Yes, it----
    Mr. Upton. Okay.
    Ms. Praisner. [continuing] provides for PEG channels.
    Mr. Upton. Finally, I would like to talk a little bit about 
the rights-of-way management. Once again, if you read on page 
61----
    Ms. Praisner. Uh-huh.
    Mr. Upton. [continuing] starting at line 11, it says this, 
``Use of rights-of-way and easements: in using public rights-
of-way and easements that have been dedicated to compatible 
uses, a BITS provider, a VoIP service provider, or a broadband 
video service provider, shall ensure that, (1) safety, 
functioning and appearance of the property and the convenience 
and safety of other persons not be adversely affected by the 
installation or construction of facilities necessary for such 
service. (2) The cost of installation, construction, operation, 
relocation or removal of such facilities be borne by such 
provider or subscriber to such provider's service, or a 
combination of both, and (3) the owner of the property shall be 
justly compensated for any damages caused by the installation, 
construction, operation, relocation, removal of such facilities 
by such provider. (B) Preservation of Authority. No provision 
of this title shall be construed to prohibit a local franchise 
authority already--or other unit of the State or local 
government--from (1) enforcing the requirements of paragraphs 
1, 2, and 3, (2) from imposing reasonable restrictions, and on 
time, place or manner by which provider constructs, alters, or 
maintains facilities that use public rights-of-way and 
easements.'' Question, again yes or no, based on what I read, 
would you acknowledge again that this staff draft does by its 
very terms preserves the local franchises' authority right to 
control the use of rights-of-way, including as it relates to 
safety, functioning and the boiler plate language that has been 
there before?
    Ms. Praisner. I am sorry, Mr. Chairman.
    Mr. Upton. Does it not?
    Ms. Praisner. On that issue, I have to say no. I do not 
believe----
    Mr. Upton. Well----
    Ms. Praisner. [continuing] and perhaps it is a 
clarification of language that is necessary. And, again, we 
would be more than willing, as I indicated, to discuss this. 
But, if you look on lines 15 and 16----
    Mr. Upton. Okay.
    Ms. Praisner. [continuing] it says, as we read this--and as 
I say, it may be that the language needs to be tweaked, and we 
are happy to talk with you, but it says the video service 
provider shall ensure. It seems to me that that leaves an 
impression that the determination of what is safety, 
functioning and appearance, et cetera----
    Mr. Upton. But it----
    Ms. Praisner. [continuing] but----
    Mr. Upton. My time is expiring, but especially we added 
this provision that says that the local franchise authority, or 
other unit--it does--``no provision shall be construed to 
prohibit a local franchising authority, or other unit, from 
enforcing requirements'' of that paragraph of subsection A.
    Ms. Praisner. Well----
    Mr. Upton. So----
    Ms. Praisner. [continuing] again, sir, it----
    Mr. Upton. Look----
    Ms. Praisner. [continuing] maybe we need to work together 
on tweaking the language. That is not the----
    Mr. Upton. I look forward----
    Ms. Praisner. [continuing] way we read it.
    Mr. Upton. I look forward to doing that. I yield now. My 
time is expired. I got to be the--it is 6:30? No. Yes. It says 
5. I have got another 5 minutes. I didn't touch it. Someone 
else did. I would recognize Mr. Markey.
    Mr. Markey. That I am destroying the evidence.
    Mr. Upton. Yes.
    Mr. Markey. Mr. Yager, in the bipartisan consensus draft, 
broadcasters were essentially held harmless. I worked hard with 
Mr. Dingell to ensure a balanced level playing field between 
the cable and Bell companies. The Barton-Upton draft upsets 
that balanced approach. From the broadcast perspective, this is 
obviously a step backward, and you would like to see those 
provisions restored to the previous consensus position that 
obligations for both wireline video competitors should be the 
same. Is that correct? And could you expand, please?
    Mr. Yager. Okay. That is correct. We believe in a level 
playing field for all----
    Mr. Yager. We believe in a level playing field for all 
video service providers. We are sure that that will ensure the 
public of a free choice of local television for both your 
constituents and our viewers.
    Mr. Markey. Would you prefer the language in the first 
staff draft?
    Mr. Yager. I will have to say I am not familiar with the 
language in the first staff draft, but as you described it, I 
would prefer that language over the other language----
    Mr. Markey. Okay. Thank you.
    Mr. Yager. [continuing] that you described.
    Mr. Markey. Okay. Thank you, Mr. Yager. Mr. Ellis, SBC's 
CEO was quoted recently in Business Week. I would like to give 
you an opportunity to contradict your boss on how SBC will 
treat access to the Internet and Internet content. But I want 
you to do so in the context of a statement in your testimony 
which says, and I quote, ``the video service will communicate 
with other IP-based services. Customers will be able to display 
on the TV secure, customized Internet content.'' My question is 
will this Internet content be of the consumers' choosing or 
SBC's choosing?
    Mr. Ellis. I appreciate the opportunity to contradict the 
chairman of my company, but I am not going to do that. To 
answer your question, the SBC has been very clear in many 
forms, including before this committee, that we will not block 
access that we provide to the Internet based on the content 
received over that access. So that is point No. 1. And point 
No. 2, with respect to the provision of services over our 
broadband facilities, the customer is going to have the option 
to utilize the facilities to access the content of their 
choosing. Now, I don't know how much clearer I can be about 
that.
    Mr. Markey. Yes. Will that be all Internet content?
    Mr. Ellis. Will it be all what?
    Mr. Markey. All Internet content.
    Mr. Ellis. All? If you are sitting in one of our houses 
that is served by our broadband facilities and you are at your 
computer, you can access whatever content tomorrow that you can 
today. There is no----
    Mr. Markey. Through the TV?
    Mr. Ellis. Through the TV application will depend on the 
development of that capability, but we will fully expect that 
you will sit at your TV and you will have the capability, if 
you want, to watch half your screen being the video that comes 
out and the other half the screen, if you want to surf the web.
    Mr. Markey. Okay. So the question, again, keeps coming back 
to who will choose.
    Mr. Ellis. The customer will choose which they want. But 
maybe what this gets to--and let me be very straightforward and 
candid about it--the provision of the video service that we 
propose to offer in competition with cable will not utilize the 
public Internet for a number of reasons. We cannot get the 
content providers, the video providers, the movie providers to 
agree to let us use the public Internet for distribution of 
their programming. There is privacy reasons; there is delay 
reasons; there is quality reasons; there is pop-up ads that 
come. So the video content will not access the public Internet.
    Mr. Markey. Okay. So if we drafted language and inserted it 
into the bill that said that Internet content will be within 
the exclusive control of the consumers' choice, would you 
support that language in legislative form?
    Mr. Ellis. I would. I might need to see it in context, 
but----
    Mr. Markey. Well, that is the question I have been asking 
you for 3 minutes, but the context is what you are about to do.
    Mr. Ellis. Let me say it this way: today, if you are our 
customer for Internet-access service, you have the choice----
    Mr. Markey. Would you support----
    Mr. Ellis. [continuing] to access whatever----
    Mr. Markey. Would you support that language being written 
into legislative form that the consumer is king and that the 
consumer has the choice of going to any Internet content that 
they want, unimpeded by SBC. Would you support that language?
    Mr. Ellis. Yes, in principle, I do. I want to see the 
language, because I want to be very clear that they have that 
capability today; they will have it tomorrow. I have no 
objection to that.
    Mr. Markey. Okay. I hope we have a second round. I thank 
the----
    Mr. Upton. I don't know that we are going to do a second 
one, you may do questions in writing, because we have got 
another long panel after this. I broke the Markey rule by going 
to two panels, but you came up with this list of witnesses that 
I wanted to accommodate you on, sir.
    Mr. Markey. I was afraid it was the last hearing we were 
ever going to----
    Mr. Upton. And you are probably----
    Mr. Markey. [continuing] have on the----
    Mr. Upton. [continuing] right.
    Mr. Markey. And I didn't want to----
    Mr. Upton. You probably had lunch and then you came back. 
Anyway----
    Mr. Markey. Well, three companies are in the private room, 
and then I wanted to give everyone else a shot here.
    Mr. Upton. Mr. Barton?
    Mr. Barton. Thank you, Mr. Chairman, and thank you folks 
for being here, and thank you for letting us go vote and come 
back, and I know that wasn't easy. Let us assume that your 
choices on Federal telecommunication policy changes boil down 
to draft one and draft two, and that is the only choice you 
get. You can be for the first draft and against the second, or 
for the second and against the first, or against both, but you 
have got to vote for one of them. How many of you folks would 
vote for draft one, the one that we put out in September? Okay. 
We have got one, two, three, four, five, six, seven, eight--we 
got nine voters in draft one. How many for draft one? Two, 
three, two-and-a-half. How many for draft two? Two. How many 
for neither draft? So you want us just to throw in the towel 
and say we can't do it?
    Ms. Praisner. Excuse me, sir, if I might comment. I don't 
think so at all. I think you have the parties' attention, and 
you have all of us at the table, and I think there was 
significant work as we worked through our staff. Some local 
government spent 12 hours with your staff--I think they told 
me. At least that is what they told me--in discussing of this 
one.
    Mr. Barton. Well the----
    Ms. Praisner. So my point is, of the two, if that is my 
choice, this one is more preferable. Do we have work to do on 
both? I believe we do, and we are ready, local governments are 
ready. We have already indicated that. We are ready to work 
with you collaboratively, bipartisanly, however you phrase it, 
we are ready.
    Mr. Barton. Well, on draft 1, we got no positive comments. 
None. Cities didn't say they liked it. Microsoft didn't say 
they liked it. The Bells didn't like it. The ILECs didn't like 
it. We got none. So I am glad to know now that you have seen 
draft two, some of you like draft one. I guess in a way that is 
progress.
    Ms. Praisner. May I comment, sir?
    Mr. Barton. But we have gotten a lot of positive comments 
on draft two. I am a little surprised I didn't see more hands 
go up for draft two, but maybe you all think it is a trick 
question.
    Ms. Praisner. May I comment, sir?
    Mr. Barton. Well, I want to ask my folks down there on the 
end from Southwestern Bell, I want to ask you a question that 
is kind of similar to the Markey question. The reason we made 
the change from draft one to draft two on Internet 
accessibility is that our content providers all told us that if 
we didn't make some sort of a change, the content providers 
were going to be susceptible to Internet viruses, and that the 
content providers wouldn't provide content. Now, I promised Mr. 
Markey and Mr. Dingell that we wanted to have total access in 
this new era. In all these new services, we wanted to have 
access to them, but we took to heart, at least I did, that we 
didn't want to open up to the providers of the content that 
their systems could get infected with these viruses. So the 
tradeoff that we attempted to make was that you could protect--
if you were a provider of video services or data services, or 
whatever it was that you were providing, that you could protect 
that, but that there would be an icon on the computer, on the 
television screen, wherever it is that the consumer was 
accessing it, that when they wanted to click over to the 
Internet, they had to click one time, whatever the icon that--
Southwestern Bell has a different icon than Microsoft or 
whatever, but it would be there, and even Joe Barton, as dumb 
as I am in high-tech, I could figure out which icon got me to 
the Internet, and I could click on it and I would have full 
access. Now that is the concept that we tried to put in the 
bill. I am going to ask my friend at Southwestern Bell if that 
concept, if it is in the bill, gives the content providers the 
ability to protect their systems, but it gives the consumer the 
ability to do what Mr. Markey said we need to do?
    Mr. Ellis. Absolutely. You did it much better than I, but 
that is what I was saying.
    Mr. Barton. All right. Now, my friend at Microsoft, are you 
satisfied with that?
    Mr. Mitchell. The way you just described it is certainly 
technically capable and would hit the connectivity principles 
of net neutrality that we have advocated. So, yes.
    Mr. Barton. I mean, that is what we are trying to do. That 
is the reason there is a change in the draft. It is not a 
change that has been accepted by Mr. Dingell and Mr. Markey. To 
their credit, they preferred the original language, and so we 
tried to keep the principle but protect the network, and if we 
haven't done it, we will keep trying, so that is our principle.
    Mr. Mitchell. Yes. I would only comment that I think the 
principle is the right principle. I think probably everyone at 
the table would agree at some level the language does need some 
tweaking as to how that actually works so that it is as clear 
as you have articulated.
    Mr. Barton. Okay. My time has expired. Thank you, Mr. 
Chairman.
    Mr. Upton. Mr. Stupak?
    Mr. Stupak. Thank you, Mr. Chairman. I thank you to the 
panel for being here. It was a lengthy panel and you sat 
through all the openings and glad to have you here today, and 
hopefully we can get this bill moving in more of a working 
together tone. Let me ask about this one, though. In the 
transition from traditional titles to the new BITS titles, it 
is not clear to me in this draft how providers make the 
transition from existing regulatory regimes to the new titles 
under this draft. For example, what if a cable operator has 
some customers under a Title I cable--I am sorry, a Title VI 
cable franchise, but also offers new services that qualify 
under the broadband video service definition. Is that provider 
required to get two franchise? Mr. Rehberger, do you want to 
hit that one? Would I be required to get two franchise?
    Mr. Rehberger. I think you hit upon one of the things that, 
not only I, but a couple of the other folks on this panel have 
talked about today. It makes no sense from a technology point 
of view the way we see it. I guess we would be a BITS provider 
today, because we provide Internet----
    Mr. Stupak. Right.
    Mr. Rehberger. [continuing] we provide VoIP-type 
technology. We are underlying providers to many of the VoIP 
providers that have been mentioned. So, clearly, we wouldn't 
understand what we fell under. If we provided a bundle of 
Internet access and voice services over a single T1 access 
line, would then--and that T1 access line happened to be under 
uni-pricing, is that uni-pricing or is the uni-pricing gone 
because now we are a BITS provider----
    Mr. Stupak. BITS provider.
    Mr. Rehberger. [continuing] and, you know, we don't get 
uni-pricing under the BITS regime the way we see it. So it 
clearly is not something that we understand, and we don't 
understand why the staff believes there has to be a, you know, 
a division of the technology. What if the next technology comes 
out that----
    Mr. Stupak. Sure.
    Mr. Rehberger. [continuing] is somewhat different than 
VoIP, different than the packet-switch network, are we going to 
go ahead and develop another regulation for that? I think it 
goes back to what I heard here on my left which is the service 
that we are offering, it is not the underlying technology.
    Mr. Stupak. Okay. Well, let me ask you this then: I have 
heard from some of my smaller companies that their ability to 
interconnect will be weakened under this draft, do you see 
that?
    Mr. Rehberger. Yes, I do. I mean, if you go back--not to 
cite out of the bill, but if you go back and look at the access 
and co-location rights, it says those access and co-location 
rights for the purpose of providing telecommunication service, 
which again, maybe it is a clarification, but to that language, 
it says to us those rights wouldn't exist under providing BITS 
service, even though they exist under telecommunication 
service. We think that, you know, what this does is provide the 
ILECs themselves a way to essentially eliminate the uni-
structure, which everyone forgets was a compromise in, you 
know, the 1996 Act, around having everyone getting their long-
distance, and so that is what we think this does. It may not be 
the biggest piece of the bill as we talk about the video, but 
it is a very, very important bill to us. And if I could add one 
more point, it is that the idea that this is less regulatory 
than where we are today, I just don't see it. It is another set 
of regulations on top of the 1996 Act.
    Mr. Stupak. In my opening, I mentioned quite a bit about 
the Universal Service Fund because we you rely upon it in 
northern Michigan and throughout rural America. Do you support 
broadening the contribution base for Universal Service Fund? Do 
you support allowing Universal Service Fund be used for 
deployment of broadband? Anyone want to comment on that? Ms. 
Praisner? You would support that obviously as a municipality 
because----
    Ms. Praisner. Yes.
    Mr. Stupak. All right. Anyone else care to comment on that?
    Mr. Rehberger. I would. We would support broadening the 
base on Universal Service Fund.
    Mr. Stupak. Well, let me ask you this then. In the first 
draft, we had the, you know, questions of how are you going to 
fund USF. Are you willing to live with a franchise fee 
agreement in your first draft which basically was based on a 
definition of gross revenues that included advertising, video-
on-demand and other revenue associated with the video offering? 
Anyone want to comment on that? Care to touch that? Mr. Ellis, 
SBC, you were talking a little bit about that today.
    Mr. Stupak. Would you support that in the first draft as--
--
    Mr. Ellis. No, we are not okay with the first draft. We 
would prefer, obviously, the second draft that ties the 5 
percent to revenues derived from the provision of the video 
services.
    Mr. Stupak. How would you fund the Universal Service Fund?
    Mr. Ellis. The Universal Service Fund, we don't have a 
problem with expanding it, so long as it is done in a 
competitively neutral way.
    Mr. Stupak. Thank you, Mr. Chairman.
    Mr. Upton. Mr. Whitfield?
    Mr. Whitfield. Thank you, Mr. Chairman. And Ms. Praisner in 
her statement made the comment that in Texas that Telcos were 
given what they wanted with fast-track franchises, and then she 
went on to say that Verizon and SBC, months after the law was 
put on the books, have offered to provide competitive choice to 
less than 1 percent of Texas households. And then she asked the 
question, is the Nation giving up the consumer protections and 
community benefits and the current franchising system just to 
provide choice to 1 percent of the population. And, Mr. Ellis, 
I would ask you, how would you respond to that criticism?
    Mr. Ellis. Well, I guess with, first, a little bit of 
amazement. It has been literally weeks since the legislation 
passed. We have filed an application for all of the city of San 
Antonio metropolitan area. It incorporates 22 communities. That 
is our initial deployment schedule. Within a matter of weeks 
from the time the legislation was passed, Verizon went in to 
Keller, Texas. It has been talked about. And within days of 
Verizon selling its services, the incumbent cable operator 
dropped its rates 30 percent and added new features. I think it 
speaks volumes for the importance of this kind of legislation 
and the practical impact that the legislation can bring about, 
not just in Texas, but nationally. We are going to get well 
beyond 1 percent, but this is--after 35 years, it has taken the 
cable to buildup to essentially their footprint. We are 
literally weeks into this process.
    Mr. Whitfield. Ms. Praisner, I know that you are certainly 
interested in lowering consumer prices, and Mr. Ellis has made 
the argument here that with that competition that they have 
provided, that in that instance, they did lower consumer 
prices. Would you respond to that, or----
    Ms. Praisner. Yes, sir.
    Mr. Whitfield. [continuing] any kind of----
    Ms. Praisner. It is my understanding--and I welcome where 
SBC or Verizon may be going, but it is my understanding from 
conversations with folks in Texas that the numbers and areas 
where they are going are at a low percentage of the overall 
population of Texas. They may get there eventually, but not in 
this initial time period.
    Mr. Whitfield. Okay. I wanted to ask Mr. Willner, whose 
company provides a lot of cable service in our area, and I am 
certainly not an expert in this issue, but I would like for you 
and Mr. Ellis both to respond to this question, Mr. Willner, if 
you would help me get a better grasp of this. If cable's VoIP, 
or voice over Internet protocols services, should be treated 
differently than the Bell's legacy telephone services, why 
shouldn't the Bell's broadband video services be treated 
differently than cable services? Would you respond to that?
    Mr. Willner. Sure. I would submit that, to the extent that 
we are competing for broadband services with similar services, 
that we should have parody in a deregulatory environment, and 
that is--that would be fine with us. And the cable industry has 
supported parody in a deregulatory fashion, and we continue to 
support that.
    Mr. Whitfield. Mr. Ellis?
    Mr. Ellis. We would support the treatment of our entry into 
the video business on the same terms which cable came into the 
telephony business, in other words, without the burdens of the 
legacy regulation. And by that, I am specifically meaning 
without any of the obligations that surround the obtaining of a 
franchise. If we have to go through the franchise process that 
exists today in the communities we intend to serve, it will 
take us, at the rate of one franchise a week, 40 years, and 
that is if we can negotiate with the 2,200 communities, one a 
week, which is--that is impossible. It would take 40 years. The 
process--it can't work.
    Mr. Whitfield. Yes. Well, Mr. Willner, would you be opposed 
to some streamlined national system to deal with this 
franchising issue?
    Mr. Willner. No, I actually disagree with Mr. Ellis. I 
think that in order to evaluate the differences between us 
entering the telephone business and their entering the video 
business, we really have to define the competitive world that 
cable operators live in today. I heard earlier a number of 
people make some comment that we don't have any competition in 
our core business, and I can assure you, Mr. Whitfield, I wake 
up every morning thinking about what Dish Network and what 
DirectTV is going to do to us that day in Henderson, Kentucky 
and everywhere else that we operate, because they are extremely 
competitive. And the reason why people confuse the fact that we 
are not already in a competitive business is because they use a 
different platform. It would be the same thing as suggesting 
that Barnes & Nobles brick and mortar shops at the shopping 
mall don't feel that they are competing with Amazon.com because 
they don't have any bookshelves, but they sell the same books. 
We are already in a very competitive field. Going into the 
telephone business where there is a legacy network hooking into 
where over 80 percent--soon to be probably closer to 90 percent 
when these mergers are completed--of the telephone subscribers 
are hooked into the existing 100-year-old telephone monopoly 
infrastructure. We need certain rules in place in order to 
force the Bells, based on historical experience, to 
interconnect with us on a fair and economically sound basis for 
consumers to have choices. So I think there are some 
differences. The differences primarily are we are already 
competing with two, and in some cases more, competitors for our 
core video business, and there is very little competition in 
the phone business. That is where the failure in the previous 
acts had been, and that is what we have to work on making sure 
it takes root.
    Mr. Whitfield. Mr. Ellis, the----
    Mr. Ellis. Well, I just--quick couple points. It is pure 
fact that cable rates have been unconstrained. Everyone in this 
room can tell their own stories, but the facts are up 40 
percent in the last 5 years. They are unconstrained by whatever 
quote competition exists. The second point I would just make, 
that reverse is true in the telecommunications world. The rates 
have gone down on virtually every service that all providers 
offer. It is a highly competitive market. And the third thing I 
would say, if you want to talk about the difference between 
cable and telephony, we have an obligation to permit resale of 
our service, co-location, unbundling, and there is a whole 
laundry list. Cable has a completely closed system, absolutely 
closed. They don't require or permit co-location. They don't 
require or permit resale, and so on. Completely different 
thing. We are not asking to impose on them the legacy 
regulations. We are not asking that, never have. All we are 
saying is let us have the same rules apply to our entry into 
the cable, into the video service business, that they had when 
they came into telephony, and that is no legacy regulation 
applicable to them.
    Mr. Upton. Mr. Boucher?
    Mr. Boucher. Thank you very much, Mr. Chairman. I have a 
microphone here. I am challenged by technology. In the wake of 
the Brand X decision by the Supreme Court which held that cable 
modem service is an information service and that unaffiliated 
Internet access providers do not have to be accommodated on the 
cable modem platform and in the further wake of the FCC's new 
rule that applies that same principle to telephone companies 
supported broadband platforms, it is now clear that 
unaffiliated ISPs do not have to be accommodated on broadband 
platforms. And that brings into particular focus the need for a 
firm principle of network neutrality that would simply say that 
any user of the Internet has the right to access any website of 
his choosing and fully enjoy the services provided by that 
website without interference by the operator of the broadband 
platform. Now broadband platform operators are going to have 
some incentive to manage. They, for example, might want to 
favor their own content in competition with the context offered 
by the unaffiliated content provider. And the principle of 
network neutrality is designed to make sure that doesn't 
happen, that there is no interference, that there is no 
favoring of the broadband operator's content to the 
disadvantage of the unaffiliated content provider and to the 
disadvantage of the broadband platform's customer. And so I 
have a couple of questions about this. Let me say at the 
outset, Mr. Ellis, that I acknowledge that when a broadband 
operator makes substantial investments in the network and 
deploys these facilities at considerable cost, that operator 
ought to have the assurance that he can deliver a reliable 
product, a high-quality product, whether it is VoIP or video, 
or something else, to the customer, and you have a right to 
expect that. On the other hand, because you are offering DSL 
service, your customer has a right to expect that some part of 
the capacity of that broadband platform is going to be devoted 
to his Internet access opportunities and that it be a 
considerable enough portion of the total capacity that when he 
wants to access an unaffiliated video provider, for example, 
there is still an opportunity for that signal to come in. And 
when he wants to access an unaffiliated VoIP provider, he can 
do that as well. And so my first question to you--and I want to 
engage also Mr. Mitchell, Mr. Putala and Mr. Krause in this 
conversation--but my question to you is do you acknowledge that 
basic principle, that you ought to be able to offer your 
service at high-quality, but your Internet customer ought to be 
able to reach any website and have sufficient capacity on your 
pipe in order to enjoy those services?
    Mr. Ellis. Absolutely, and just so I am clear, if you 
obtain our service, you will have the ability to access the 
site of your choice over the public Internet, and we will not 
interfere with it in any way, as long as it is lawful content. 
I want to make it clear that is to be distinct from the 
provision of the video that will be completely segregated, kept 
apart from, the public Internet.
    Mr. Boucher. Right. I understand that. That is your 
business model. What about the capacity that will be available 
on your platform for the public Internet access part? How will 
that compare to the capacity that you are going to utilize for 
your closed video service?
    Mr. Ellis. For individual customers, there is ample 
capacity that will be out there. That is not an issue. Today, 
you get 1.5 Megabits. We strive to provide that depending on 
where you are. We will have ample capacity, and if a customer 
wants more than 1.5, they want to go to 3, we will sell it to 
them. But I make clear to people in my simple way of looking at 
this, that there is three parts to this Internet. There is the 
part we provide from the house to----
    Mr. Boucher. My time is limited, Mr. Ellis. I think you 
answered my question. Based on that answer, I assume you would 
not disagree with a requirement that you not unreasonably 
restrict the amount of capacity that is available for the DSL 
service you are going to be selling?
    Mr. Ellis. In--our position on this, like so many other 
things, that heavy-handed regulation shouldn't be there. It 
ought to be commercial terms negotiated with all providers.
    Mr. Boucher. All right. I see some heads shaking on the 
panel here. Let me engage Mr. Mitchell, Mr. Putala, Mr. Krause, 
if you would like to respond to what Mr. Ellis has said and 
perhaps address the general assembly.
    Mr. Upton. Quickly.
    Mr. Krause. Yes, I want to say something very quickly, 
which is Mr. Ellis makes an important point, which is there is 
a very important distinction between what is delivered on the 
public Internet compared to what is a managed service that uses 
Internet technology but is in fact more akin to the intranets 
that we all access today. So as long as there is a very clear 
distinction between the two, and a separation, logical or 
physical, between the two, this is critical to the delivery of 
the IP video service because otherwise you won't get the 
content authored to you from the Hollywood studios.
    Mr. Boucher. And it is a capacity issue with regard to the 
public side of that, isn't it?
    Mr. Krause. Yes, it is. In fact, the public side of the 
Internet, the Internet is essentially a best effort service. So 
when we say we offer 3 Megabits, the subscriber doesn't 
actually get 3 Megabits of sustained bandwidth. They get some 
very small percentage of that and it is allowed to peak. That 
is what is the Internet. The managed intranet is very different 
from that. It is actually a sustained guaranteed bandwidth so 
that the service provider can deliver the quality that the 
studio requires to deliver the content.
    Mr. Boucher. All right. Mr. Mitchell, Mr. Putala, would you 
care to comment?
    Mr. Mitchell. I would have made the same comment as my 
colleague to my right, Mr. Krause.
    Mr. Boucher. All right. Mr. Putala?
    Mr. Putala. Absent a real commercial incentive, it is real 
hard to get to the deal that Mr. Ellis described. What we are 
concerned is not so much that they are going to block, but it 
is a question of prioritization and what happens within the 
guise of prioritization. If Mr. Ellis has got his own video 
packets and his own VoIP packets going over his switch, same 
customer--SBC customer for VoIP and for video and he always 
puts his VoIP packets ahead of his video packets--because that 
is what the technology requires--okay. That is fine. But if it 
is an EarthLink voice customer, let us make sure there is 
language in there to protect the fact that EarthLink customers, 
when their VoIP packets cross along on the same pathway, that 
they also get jumped ahead of the video packets so it is the 
same level of service, just for different customers, and that 
would----
    Mr. Boucher. If there is adequate capacity on the public 
side however, that is not a problem, because over that adequate 
capacity, your VoIP service can travel, right?
    Mr. Putala. If it is----
    Mr. Boucher. As long as it is adequate?
    Mr. Putala. As long as it is adequate, it is not a problem.
    Mr. Boucher. Okay. So my final question, Mr. Chairman--
thank you for your----
    Mr. Upton. Be very quickly.
    Mr. Boucher. If I may, would the 3 of you who have just 
answered agree that some requirement that adequate capacity be 
reserved in these instances for the public side would be 
appropriate?
    Mr. Upton. Yes or no?
    Mr. Mitchell. Yes.
    Mr. Ellis. Yes.
    Mr. Boucher. Mr. Krause?
    Mr. Krause. Yes.
    Mr. Boucher. Okay. Thank you. Thank you, Mr. Chairman.
    Mr. Upton. Mr. Shimkus? Strike him out. I just--as a 
deferral who has no opening statement gets 3 minutes.
    Mr. Shimkus. I know. I am going to be--I know everything 
that I want to be asked has been asked already. Just give me an 
idea, did we--did anyone ask any questions on E911 yet? Okay. I 
will just stay on that vein then because you all know that Anna 
Eshoo and I worked very diligently with the public responders 
in pushing enhanced 911. We all know that there is a concern 
about identification/location based upon VoIP. There is an 
expectation by the public, and that is an expectation this 
committee will want to fulfill. And I know there is, based on 
the opening statements which I was present for, I know that 
there is some concern technologically about the ability to do 
that. But, a statement, and then I will let people respond. I 
would just say that I--you can't always speak for all members 
of the committee, but I think once we move a process, that the 
expectation that someone uses and calls 911 over any medium 
will have the expectation that people can know where they are 
at. And that is what I hope you all will address, and I will 
open it up to anyone who may want to comment on that.
    Mr. Putala. Congressman, knowing of your leadership on the 
911 topic, we at EarthLink are doing our level best to comply 
with all the very abbreviated deadlines that the FCC has asked 
us. I think we are at about 94 percent compliance in terms of 
letting our customers know. We have done repeated emails to try 
and let them know of the capabilities of the service. We are 
only going to be marketing the 911 service where the 
infrastructure allows it. And that raises an important point 
that is addressed in the draft about the central importance of 
making sure that there is non-discriminatory access to the 911 
infrastructure controlled by SBC and others, and there is an 
important omission in the staff draft. I think I understand the 
reason, but I would be remiss not to note it, of ensuring the 
same kind of regulatory parody, the same kind of liability 
parody that has been--I think it was included in your 
underlying legislation, and we hope that at the end of the day, 
I hope that VoIP providers will have the same thing as 
wireless, wireline in terms of the liability protections.
    Mr. Shimkus. Anyone else?
    Mr. Rehberger. Yes. Congressman, if I may, I agree on the 
liability portion of that bill. Very important for us. And 
then, second, we are fortunate in that our customers are 
businesses and they stay in one place, so we don't have an 
issue. Although, we are working very hard with some of the VoIP 
providers who we--they use our underlying network to make sure 
that they can provide E911 services to their customers.
    Mr. Salas. Congressman, I would just add that this 
capability will not happen by accident. It will require, I 
think, continued focus and development on standards to make 
this work I think the way you intend for it to work.
    Mr. Shimkus. Well, and we just got a great organization 
grouping caucus with both members on bipartisan members in the 
House and Senate, of course, and in the industry working well 
together that and we want to applaud that. Yes, ma'am, you 
wanted to say something?
    Ms. Praisner. Yes, sir. Thank you. I wanted to share that 
from my perspective and from the local government officials, 
obviously this is a critical issue as well, having our 
constituents and our consumers know that when they make that 
911 call, it connects with the right place. My--some of the 
colleagues who have reviewed the legislation have raised some 
concerns about the fact that the legislation does not include 
an EASS video requirement for 911 so we obviously would want to 
work and look at that issue.
    Mr. Mitchell. The only comment that I would make is just to 
note that there are distinctions in different types of VoIP 
services as I noted earlier, and to make certain that we don't 
end up with something where click-to-calls for Xbox Live or 
similar kinds of uses of the technology somehow become burdened 
by E911 and similar obligations.
    Mr. Shimkus. Mr. Chairman, with that I want to thank the 
panel. I know they have been long-suffering and I appreciate 
them being here, and I yield back.
    Mr. Upton. Mr. Inslee?
    Mr. Inslee. Thank you. Mr. Ellis, I wanted to ask you 
about--Mr. Boucher's last question was a question of, 
basically, should there be a maintenance of some minimal level 
of public access--access to the public Internet over these 
pipes, and the other folks answered yes, and your comments, as 
I understood them, were helpful in that regard. And that is why 
I appreciate you being here today to expound on them. But, if 
you could really clarify a little bit what you see where your 
vision is in that regard, providing consumers with level or 
levels of access to public Internet. You made a reference that 
if there was a larger amount available, you would sell it to 
them, I presume, for a higher price. I guess the question is I 
have, do you envision some regulatory or statutory minimal 
level of access to the public Internet over your pipes, and if 
there is a minimal level, do you envision tiers where you would 
sell for additional cost this additional level of service as 
far as just--I don't know--the pipe you take up.
    Mr. Ellis. I guess my personal vision of how this service--
our service will work is like this. We will provide, using 
these facilities, a video alternative--that is one piece the 
facility will use for that. In addition, we will provide to our 
customers the same thing we have today, that is the capability 
to access the public Internet and the content of their 
choosing. That is how I envision this going forward. I think as 
a practical matter, a level of 1.5 Megabits that we offer today 
with DSL, there will be many, many people who will want more, 
and we will offer that. Will there be an additional charge? 
Sure. The more bandwidth they want, the more the charge. But I 
would--the point I tried to make earlier, your focus--and the 
focus is on one-third, the point from the house to the 
backbone. Then there is the backbone, and there are 17 or 18 
backbones and it goes all over the world. And then there is the 
downside. We control and offer one-third of that. We assure 
quality 1.5 Megabit, or try to. But what happens on the rest of 
that Internet, the lowest common denominator is the flow-
through that a person gets, and the dissatisfaction, I submit, 
that is going to grow as more applications, more sophisticated, 
is not going to be solved by focusing on one-third. It is going 
to be the other two-thirds as well. I don't know if that helps, 
but that is where my personal view of the focus of the future 
and where everybody is going to have to invest in the 
infrastructure. Not just the ILECs, not just the cable people, 
but--the applications providers, to make sure that entire flow-
through gives the kind of quality that will support the kind of 
applications that are out there.
    Mr. Inslee. And what effects of this bill would you 
encourage to look at in that regard to encourage those 
investments on the other part?
    Mr. Ellis. I am--as I said, there are probably things if I 
had written this bill or draft, I would have done differently, 
but we are happy with the bill in its present form.
    Mr. Inslee. Thank you. Mr. Mitchell, I wanted to ask you, 
just continuing talking about net neutrality, do you think 
there are any providers of broadband Internet access that 
should be exempted from net neutrality, or should this be a 
universal principle?
    Mr. Mitchell. I think we have been pretty clear that we 
view the net neutrality as pretty much a universal principle 
for providing Internet access to consumers across the board. 
You know, with--that has been the basis of the Internet success 
today. In fact, I think Vint Cerf today, the father of the 
Internet as perhaps we know it, is receiving a Presidential 
Medal as a result of, you know, getting us to this point. These 
principles of being able to go anywhere and use whatever 
content, clearly within the limits of the capabilities of the 
devices you have--my phone doesn't do as well as my PC on the 
Internet--but that is a universal principle that should be 
applied.
    Mr. Inslee. Thank you. Thanks, Chairman. Yield back.
    Mr. Upton. Yes, before we yield to Ms. Blackburn, I just 
want to make two unanimous consent requests. One from Mr. 
Ferguson to put in a statement from ADC Telecommunications and 
one from Mr. Markey to enter in a Vint Cerf, founding father of 
the Internet--I thought that was Al Gore. Put a letter in from 
him as well. Without objection?
    Mr. Markey. Mr. Chairman, could I briefly be recognized, 
and because Mr. Mitchell made reference to Vint Cerf, and he is 
receiving the Medal of Freedom today, and his letter to us, as 
Mr. Mitchell said, says to us today, ``My fear is that as 
written, this bill would do great damage to the Internet as we 
know it. Enshrining a rule that broadly permits network 
operators to discriminate in favor of certain kinds of services 
and to potentially interfere with others would place broadband 
operators in control of online activity. Allowing broadband 
providers to segment their IP offerings and reserve huge 
amounts of bandwidth for their own service--that is SBC--will 
not give consumers the broadband Internet our country and 
economy need. Many people will have little or no choice among 
broadband operators for the foreseeable future, implying that 
such operators will have the power to exercise a great deal of 
control over any applications placed on the network.'' I ask 
that it be included in the record.
    Mr. Upton. Good. Without objection.
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    Mr. Upton. Ms. Blackburn?
    Ms. Blackburn. Thank you, Mr. Chairman, and I am glad you 
have this statement from ADC Telecommunications. I was going to 
ask for that permission and I will not make a comment about Al 
Gore being the father of the Internet, saying as Tennessee--Ms. 
Praisner, I think I would like to come to you, please. In your 
testimony under Roman Numeral VI.1, you say that everyone loses 
because local governments will not have proper management of 
their streets and sidewalks, and I will have to tell you I am 
pretty disappointed in hearing that come from you because it 
looks disingenuous. But, I want to tell you that I think that 
this, in no way, undermines the ability of cities to manage 
their rights-of-way, and I think you can go to page 61 of the 
bill, Section 406, and see that it specifically states that you 
will ``continue to retain explicit authority to manage your 
rights-of-way.'' Mr. Putala, to you, please, sir. I imagine a 
lot of this, you are sitting there thinking they are fighting 
over franchise fees and everything is going to go wireless so 
it is a debate that is going to be out there at some point in 
time. Very quickly to you because time is limited and we are 
going to have a vote and others have questions, your project on 
the EarthLink municipal networks that you were doing with 
Wireless Philadelphia, I would love to have from you, if I 
could please, sir, something about cost, about the revenue that 
you will pay to the wireless Philadelphia Project to help 
bridge the digital divide, and what you see as the cost-
savings--the amount of time that you will save in putting that 
network up over that 135 square mile area, and then also what 
you think the savings overall will be for the community. And I 
will not ask you to expand on that right now, but I will ask 
you to submit that to us.
    Mr. Putala. It is fine. I can give you very briefly. $15 to 
$20 million of capital expenditures on our nickel. We will be 
sharing hundreds of thousands of dollars with Wireless 
Philadelphia to provide computers and others to the lowest 
income Philadelphia residents. We will be charging a retail 
rate of somewhere in the neighborhood of $20. We are going to 
charge a wholesale rate that will be available to anybody who 
wants to bring customers to our network for about half that, 
about $10. That same $10 half-price offer will be available to 
lower income Philadelphia residents. The speeds will be about 
1MB up and down, which is faster than the slower versions of 
DSL, but slower than the faster versions.
    Ms. Praisner. Okay. But no franchise fees and fussing over 
right-of-way, right?
    Mr. Putala. We operate on God's Highway, but I will note--
--
    Ms. Blackburn. So I will tell you what, I am going to tell 
you, sitting here, listening to this and being a Tennesseeian, 
I think if we were discussing the Federal interstate highway 
system, that there would be somebody out here trying to reserve 
a lane for horses and buggies, I tell you. The status quo is 
there are some who are trying to preserve that. Ms. Praisner, I 
want to come to you, if I will. Ma'am, if I have a question----
    Ms. Praisner. Okay.
    Ms. Blackburn. [continuing] if you would let me----
    Ms. Praisner. Oh.
    Ms. Blackburn. [continuing] ask the question----
    Ms. Praisner. Sure.
    Ms. Blackburn. [continuing] for you. Under Roman Numeral 
VI.3, you state community needs are essentially abandoned, and 
it is my understanding that the committee draft requires any 
new entrant to meet those needs and provide the PEG channels, 
and I believe that new entrants may even provide more. Coming 
from an area where there are plenty of content producers, they 
are probably going to provide more in order to entice consumers 
to choose their products, so I would like for you to very 
quickly, in 30 seconds, tell me how you think this abandons 
community interests.
    Ms. Praisner. Well, we are talking about two different 
things. You are talking about what you may offer as a 
commercial provider to entice someone to subscribe. I am 
talking about the franchise process which allows a local 
government to identify what are the community needs through the 
franchise process. And then in the process----
    Ms. Blackburn. Okay. If--is that what you mean by meeting 
social obligations?
    Ms. Praisner. Yes.
    Ms. Blackburn. Because you have mentioned that you think 
there needs to be fair compensation through social obligations 
to the community, and that is under point 4 of your testimony. 
So if you want to submit something in writing to further 
explain what you see as the social----
    Ms. Praisner. I----
    Ms. Blackburn. [continuing] obligation----
    Ms. Praisner. [continuing] would be more than----
    Ms. Blackburn. [continuing] in addition to the----
    Ms. Praisner. [continuing] happy to.
    Ms. Blackburn. [continuing] franchise fee and the----
    Ms. Praisner. And I will also provide testimony in response 
to your comments about page 61----
    Ms. Blackburn. Okay.
    Ms. Praisner. [continuing] I discuss when you----
    Ms. Blackburn. That will be wonderful. Another thing, in 
your testimony, point two, footnote four, want to go there 
because you say, ``let there be no mistake, local governments 
want competition as fast and as much as the market when some 
States will--laws will sustain.'' There is a footnote there, 
footnote 4, and when I went to the footnote, you discuss level 
playing statutes and that also some cable franchises contain 
these provisions as contractual obligations on local 
governments. Now, my question to you is this, are you hearing 
from your members who would like to offer an additional cable 
franchise that might not be identical but they are prohibited 
from doing so because of the level playing field laws or any 
competitive contracts that cities might have signed simply to 
try to get a cable provider into their area? And I would assume 
that you are hearing what you are hearing from your members who 
want some relief from anti-competitive laws like these, that 
you are probably hearing from them, too. So when can this 
committee--when can you get me some data from your organization 
to document the scope of the problem as you see it, and let us 
know how many cities want to offer an additional franchise but 
are reluctant to do so out of fear of being sued and pulled 
into court and having to spend taxpayer money to defend 
themselves simply because they want to offer one service? If 
you will, please submit that. And I am out of time. I am over. 
Thank you and I yield back.
    Mr. Upton. Mr. Gonzalez?
    Mr. Gonzalez. Thank you very much, Mr. Chairman. My 
apologies for being absent for much of the testimony. The--but 
I assure the witnesses that we have your written statements 
and, along with staff, we closely go over those. My question 
will be to Mr. Ellis, and the second question to Ms. Praisner. 
Mr. Ellis, of course we have the Texas experience. Texas Senate 
Bill 5 regarding franchise authority that was passed recently, 
and I would like to know what SBC has done under that 
particular legislative scheme. Of course, we are looking at it 
at the Federal level in preemption, but what has SBC done. And 
if you will also go over the chronological order of when that 
bill was actually passed and when you all have submitted an 
application and where we are today. And then I, quickly, Ms. 
Praisner, wanted to tell you about what I am already receiving 
from the city of San Antonio questioning the FCC's authority, 
or their interpretation that this proposed draft allows the FCC 
to take over basically disputes that--as far as right-of-way 
disputes and the concerns. And I apologize again if you have 
gone over that, but those are the questions. Mr. Ellis, I 
appreciate it.
    Mr. Upton. You need to turn that mike back on. There is a 
button there someplace.
    Mr. Ellis. As you indicated, Congressman, the Texas 
legislation was passed about 60 days ago, and since that time, 
we have filed our initial application for the city of San 
Antonio, 22 communities, essentially the entire metropolitan 
area of San Antonio. We will--that was recently approved. I 
think in the last week we got the Texas Commission's approval, 
and we will go forward with deployments starting in December 
will be our initial trial. We will start offering commercial 
service sometime in the middle of the year. Was there some 
other--we intend to go--we intend, in a 3-year period, to offer 
video services to approximately half our customer base, about 
roughly 18 million customers in 3 years.
    Mr. Gonzalez. Okay. Well, thank you very much, Mr. Ellis. I 
just wanted to point out under the Texas experience and that 
SBC and other similarly situated companies are wasting no time 
obviously to go through the license application, which has been 
streamlined. Obviously, you have a State standard now. And then 
to offer those services. I know that legislation was promoted, 
and just that it is being taken advantage of. And then to Ms. 
Praisner?
    Ms. Praisner. Yes, sir. The concern that the Texas 
municipalities have raised is what happens within the dispute 
process, and with the issue of having to go to the FCC when--
and having the FCC in essence be court of last resort as 
opposed to the court process which exists at this point. So I 
think that is the concern that they were raising to you and the 
concern that has been raised. We have very little experience 
obviously with the Texas legislation at this point, and hope 
that SBC will allow us, as they said--I am not sure if it is 18 
million households, what percentage of the population that is 
as well. That is the other issue we raised.
    Mr. Gonzalez. Let me ask you, Ms. Praisner, real quickly--I 
do have a little bit of time left. When it comes to right-of-
way disputes and anything that is, I guess, supplanted by, you 
know, Federal authority where you have the FCC actually being 
the final arbiter of any--is there anything similar to that in 
any other municipal scheme where you would have a Federal 
agency of this nature that would come in and actually act in 
that capacity?
    Ms. Praisner. No. I just checked with folks behind me 
because I couldn't think of any. Not that I am aware of.
    Mr. Gonzalez. All right. All right. Thank you very much. I 
yield back the balance of my time.
    Mr. Upton. Mr. Bass?
    Mr. Bass. Thank you, Mr. Chairman. And, like my friend from 
Texas, I want to apologize for not having been here for a lot 
of the hearing. It has been a very busy day. But this is an 
exceedingly important hearing on a very important bill, 
updating telecommunications. The bill is complicated and there 
may be some issues involving its interpretation, how it would 
be--how it would work. I hope that my friend from Michigan, the 
Chairman, will be--will have a prudent go-slow attitude about 
this and that we don't move overly expeditiously so we make 
sure we know what we are doing, because we know from the Act of 
1996, there are problems that came about which might have been 
resolved had we made a few little corrections. As I said a 
minute ago, or I started to say a minute ago, that one of the 
flaws of the 1996 Act was that in some instances it failed to 
provide the FCC the authority to issue some of the rules that 
were needed to enact their interpretation of what Congress 
intended, and ultimately the legislation itself was 
sufficiently obscure on its own to cause telecommunications 
policy process to include what basically became routine visits 
to the judicial branch, and basically slowing down the progress 
of telecommunications growth. I am sure this provided plenty of 
work for telecommunications lawyers, but it has been one of 
my--one of the two objectives that I have had in approaching 
this legislation, that it provide the business community and 
the providers with regulatory certainty and avoid this routine 
of--circle of going to court every time the FCC makes a 
decision. My question to the panelists are are there any 
specific areas in this staff draft that we are looking at today 
that you think will cause more litigation, either through 
uncertainty, the incumbent providers in industry looking to 
draw out maximum benefit or actual confusion on the legislative 
intent? In other words, uncertainty, incumbent providers in 
industry looking to draw out maximum benefit or actual 
confusion on the legislative intent? Yes, sir.
    Mr. Rehberger. I may be repeating myself for the other 
members, but since you asked the question, I pointed out that 
separating the technology--packet-switching technology, 
circuit-switching, voice versus data, to me creates a whole set 
of questions and a whole set of interpretations that the 
telecommunications lawyers will gladly debate for years to come 
if the bill is enacted like it is. Our company, as I have 
mentioned, we sell data, voice, Internet, VoIP-type products 
all in one. I wouldn't know which regulations apply and which 
didn't. I wouldn't know if the co-location obligations that the 
ILEC had under the 1996 Act would apply to me now as a circuit-
switch or a packet-switch or a BITS player. I wouldn't 
understand if the ILECs would continue once they were BITS 
players to have to offer special access tariffs. So I think 
that is the area that is most confusing, and I will say it 
again. I think for some reason the--there has been a long hard 
battle, as you have alluded to, since that Act in every major 
level of judiciary, and I think we have gotten to a point now 
where neither is happy, and maybe that is the point we will 
stay. I think this is going to open up, again, the wound and 
create a lot of--a lot more time in the courts.
    Mr. Bass. Anybody else?
    Mr. Willner. If I could just expand on that a little bit. 
We talked a little bit earlier about network neutrality issues, 
which is a subject that is really in fact being governed by the 
marketplace today. I mean, I don't think my company, I don't 
think Mr. Ellis' company, would commit marketing suicide by 
doing things to consumers that other people aren't doing. The 
question then is really is there a need for preemptive 
legislation for a problem that doesn't yet exist, and in fact 
the marketplace will probably govern much more effectively, 
which will then give a lot of litigators, a lot of regulatory 
attorneys the opportunity to try to reinterpret what network 
neutrality really means under any statute that was trying to be 
preemptive in the first place. So it is solving a problem that 
doesn't exist, and therefore--there is language that is 
ambiguous because we don't know exactly what we are solving 
for, and is it really not something that should be dealt with 
if the problem should develop in the competitive world?
    Mr. Ellis. Congressman, I would only add that the Telecom 
Act of 1996 was billed as a deregulatory act. That was its 
promise. The summer of 1996, FCC came out with its first order. 
It was 700 single-spaced pages. It had 1,400 footnotes, and 
since that time, there have been literally thousands and 
thousands of rules and regulations to implement that 
deregulatory act. Any time you replace a marketplace with rules 
and regulations, there will be litigation.
    Mr. Bass. So you think this bill is overly regulatory?
    Mr. Ellis. I think it is to a degree, but as I have said, 
we support the bill. We understand the pragmatic situation, and 
it is probably the best that we can do.
    Mr. Bass. All right. I yield back.
    Mr. Upton. Gentleman's time has expired. Mr. Radanovich?
    Mr. Radanovich. Thank you, Mr. Chairman. I, first of all, 
want to thank the Chairman and the committee staff for your 
hard work and leadership on providing this draft and moving the 
process forward. However, the draft legislation before us is 
silent regarding digital content protection, and in fact some 
content owners are concerned that Section 104 of the discussion 
draft might even impede the ability to work cooperatively with 
BITS and BVS providers to implement anti-piracy measures. My 
question, when I get through with this, will be for Mr. Ellis. 
I think I would like to get your opinion on this. The 
imperative of protecting copyrighted work, both for the sake of 
the individual artist and the continued growth of our economy, 
requires that BITS and BVS providers be given unambiguous 
authority to take preventative and other measures against 
infringing activity by subscribers that are intent on breaking 
the law. This might mean requiring its devices used to connect 
to their service include copyright protection technology, or 
being able to block access to peer-to-peer networks, 
overwhelmingly used for infringement, or even terminating the 
service of subscribers who are repeat infringers. I would 
appreciate--Mr. Ellis, can you tell me your views on this 
matter, and whether or not you would agree with suggestions for 
clarifying the authority of service providers to employ anti-
piracy measures?
    Mr. Ellis. Our position is very clear. This came up in our 
company with respect to the copying of the songs and all of 
that. We went to court rather than be the policeman of that. We 
are not in a position--don't want to be in the position of 
blocking access to the content. On the other hand, if somebody 
is doing something against the Law, then we would be--we would 
support and facilitate somebody else in enforcing those rights. 
We don't want to be the policeman. We don't want to block our 
customers access.
    Mr. Radanovich. You don't want to be the cop and I 
understand that, but you do support legislation that would fix 
that?
    Mr. Ellis. Yes, we would be supportive of that.
    Mr. Radanovich. Okay, thank you. My second question is for 
Ms. Praisner. Thank you for being here today. I do want to draw 
on your statement that local government will never agree that 
local franchise process has been impeded by--has impeded video 
competition. The New York Times recently suggested that there 
were 33,000 local franchise authorities in the United States, 
and the Wall Street Journal recently reported that Verizon 
alone has launched franchise negotiations in about 300 
communities for its new video service, but has only secured 
about 14. That article also reports that in some of those 
communities, budget strapped local officials are greeting 
Verizon with expensive and detailed demands, including in New 
York State where Verizon faces requests for seed money for 
wildflowers and a video hookup for Christmas celebrations. 
Holliston, Massachusetts is seeking free television for every 
house of worship. Others want flower baskets for light poles, 
and that is just a few of about--of what the 300 communities in 
which Verizon is attempting to secure franchises. It says 
nothing about any of the other 32,700 franchise authorities 
across the country and their possible requests. So my question 
is, in light of those examples from the Journal article, will 
you still never agree that the local franchise process has 
impeded video competition, the very same video competition that 
you stipulate reduces cable rates and enhances services?
    Ms. Praisner. Yes, sir, I will still never agree because 
the information in those articles is just not factually 
correct, and I do have the information that can respond to 
those. We did go out and find information. There is a provision 
within the Massapequa Park, which is in New York, franchise 
agreement for capital support payment for $27,000, which is the 
same as a cable provider, but there is no provision for any 
kind of planting of wild flowers. There are--and I can tell you 
from my experience as a member of the Local State Government 
Advisory Committee for the FCC. We found ourselves in the same 
situation with cable--with cellular tower and with the rollout 
of digital television. Continuously the FCC would hear of 
accusations, outrageous statements of what local government was 
requiring, and, in fact, it led us to ask the FCC to have the 
applicants or the complainant notify--formally notify a local 
government when its name was used so that the local government 
would have an opportunity to provide the facts. And in every 
situation that we have dealt with at the local-state government 
level with the FCC, the facts turned out to be on the local 
governments' side. So we are trying to respond to the Wall 
Street Journal, and we will--hope to do so. It depends upon 
whether the Wall Street Journal will print our article. And we 
are also trying to respond to the New York Times.
    Mr. Radanovich. If you could----
    Ms. Praisner. I did----
    Mr. Radanovich. [continuing] provide the response to the 
committee----
    Ms. Praisner. I will be more than happy to do so. Let me 
just say that----
    Mr. Radanovich. Actually, I am out of time.
    Ms. Praisner. Oh, okay.
    Mr. Radanovich. Thank you very much.
    Ms. Praisner. Thank you.
    Mr. Radanovich. Thank you, Mr. Chairman.
    Mr. Upton. I will note that a reporter from the Wall Street 
Journal just left the room before you answered that question, 
so----
    Ms. Praisner. Time----
    Mr. Upton. I don't know if they wrote this--if he is the 
author of that story or not, but I will--I am sure he will be 
looking for some of us a little bit later. I am going to give 1 
minute since there are not Democrats that have not asked 
questions. I am going to yield 1 minute to Mr. Markey to ask a 
final question----
    Mr. Markey. Thank you.
    Mr. Upton. [continuing] and then I will----
    Mr. Markey. Thank you.
    Mr. Upton. [continuing] proceed.
    Mr. Markey. Thank you, Mr. Chairman. Mr. Ellis, I just want 
to clarify, I think that what you are saying is that when you 
are offering access to consumers to the public Internet, that 
consumers can go where they want and access any lawful Internet 
content, but that the broadband video service is not 
necessarily going to offer consumers access to the public 
Internet per se. Is that correct?
    Mr. Ellis. That is pretty close.
    Mr. Markey. Okay. Thank you. That helps us to understand 
the playing field on this. And, Mr. Mitchell, in your 
testimony, you say we have heard that part of the reason for 
excluding BDS providers from Section 104 stems from a concern 
for spam or viruses. Let me start by saying that we 
respectfully disagree with that claim as a technical matter.
    Mr. Mitchell. As a technical matter, that refers to whether 
or not it is possible to combine an access to the public 
Internet with a private-managed service on the same device. And 
as a technical matter, it is possible to do that.
    Mr. Markey. And so on that, you would disagree with----
    Mr. Mitchell. Right.
    Mr. Markey. [continuing] any assertions that that would be 
a technical obstacle.
    Mr. Mitchell. There are examples of things that do that 
today. We have had MSN TV2 which is a product that is in the 
market that delivers the public Internet service to a 
television set. I think the issues that Mr. Ellis has referred 
to regarding the ability to negotiate for content rights on a 
private-managed network are legitimate issues, that is they are 
legitimate business concerns. But purely as a technical ground, 
is it possible to do this in a secure manner? Yes, it is 
possible to do it in a secure manner.
    Mr. Ellis. That is right.
    Mr. Upton. Your 1 minute is rapidly finishing up. Mr. 
Krause, did you want to respond? Do you agree with that?
    Mr. Krause. Yes, we have a much more conservative view on 
that, probably, than my colleagues at Microsoft. We have a lot 
of experience around the world where there are other IP video 
deployments going on. We are very mindful of the security issue 
and we spend a lot of time on it. In fact, you know, we all 
know our PC experiences here, don't have to be reminded of 
them, but I will say that it is a very important point with the 
content community. There are real security issues if you bring 
the public Internet into convergence with the intranet. Our 
companies don't let us do it. You don't have it on your laptop. 
It is a big issue and you probably open yourself up to some 
very serious security issues if you combine the functionality 
of one----
    Mr. Markey. If the content community did not object, would 
there be a problem in sending it through?
    Mr. Krause. If the content----
    Mr. Markey. If the content community did not object, Mr. 
Krause.
    Mr. Krause. I am not such a big fan myself of the content 
communities so to speak, but the customers will object because 
you have the difference between your PC experience being a one-
on-one experience, and I can deal with being--getting a pop-up 
ad on my PC about Viagra----
    Mr. Markey. You just said people--you couldn't do it 
because the content community wouldn't let you, and now I am 
proposing that they do let you, and you are saying, well, I am 
not a big fan of the content community. Well, they are on your 
side now. They are saying they will let you do it, and now you 
are saying you still won't want to do it, and I think that is 
the real problem, and I----
    Mr. Krause. No, I----
    Mr. Markey. [continuing] am siding with Microsoft on this 
one.
    Mr. Krause. They have a valid----
    Mr. Markey. I think Microsoft and the rest of these 
companies are all closer to the truth than you are, Mr. Krause.
    Mr. Upton. I think we will finished this conversation 
another time.
    Mr. Krause. Okay.
    Mr. Upton. Mr. Stearns?
    Mr. Stearns. Thank you, Mr. Chairman. Mr. Ellis, let me ask 
you a question. You have been out there with deployment and 
fiber technology over the last several years. Let us say we 
don't pass a bill here and we do nothing. You are not going to 
stop, are you? I mean, you are going to continue going forward, 
are you? Aren't you, or now you are not?
    Mr. Ellis. We are not going to stop.
    Mr. Stearns. Right. So, I mean, whether we pass a bill or 
not, companies like yourself will still continue deployment?
    Mr. Ellis. We are going to continue deployment.
    Mr. Stearns. Okay.
    Mr. Ellis. Will we do it as fast? Will it be as wide-
spread? I gave you examples.
    Mr. Stearns. That is the question.
    Mr. Ellis. It is going to be 40 years at one a week. That 
is what it is going to take if we negotiate one franchise a 
week. I mean, you know, we don't want that. We want clarity, 
certainty----
    Mr. Stearns. Okay. We got----
    Mr. Ellis. Let us say this bill doesn't----
    Mr. Stearns. What is your 5-year plan for deployment?
    Mr. Ellis. What is what?
    Mr. Stearns. 5-year plan for deployment?
    Mr. Ellis. We have a 3-year plan.
    Mr. Stearns. What is your 3-year plan?
    Mr. Ellis. We are going to go 3 years to half the homes in 
our operating territory.
    Mr. Stearns. And how big----
    Mr. Ellis. 50 percent in 3 years.
    Mr. Stearns. [continuing] is that? How big is that?
    Mr. Ellis. How big is that? It is 18 million homes.
    Mr. Stearns. In 1\1/2\ years?
    Mr. Ellis. In 3 years.
    Mr. Stearns. In 3 years, okay. Uh-huh. Uh-huh.
    Mr. Ellis. That is our game plan. If we don't get this 
legislation or get a Texas-type in each of our States----
    Mr. Stearns. Okay. Now, let us say we do pass this 
legislation and it is pretty much like you like, what will your 
3-year plan look like then?
    Mr. Ellis. Without the legislation?
    Mr. Stearns. With the legislation.
    Mr. Ellis. With the legislation? Well, we are going 
community by community with the initial places----
    Mr. Stearns. Well, I am just--Mr. Ellis, I am just trying 
to get a contrast between what your 3-year plan is without this 
legislation and what you perceive your 3-year plan would be----
    Mr. Ellis. If it----
    Mr. Stearns. [continuing] with this legislation.
    Mr. Ellis. If we do not have this legislation, we will 
deploy first in Texas because we have the State statute that 
lets us deploy without going through the franchise process. We 
will go to every single place we can in Texas first, and that 
is roughly about 40 percent of our homes. That is an estimate. 
That is where we will go first, and then we will go to the next 
State that passes a legislation if there is----
    Mr. Stearns. So you will go State by State?
    Mr. Ellis. Yes.
    Mr. Stearns. Okay. Mr. Putala, Mr. Rehberger has a quote 
here that staff has put in place and I will just quickly read 
it. ``The assumption in the bill that those who want to compete 
in offering communications services to business/residential 
customers can simply build their own network is mistake due to 
basic economic realities.'' So I think Mr. Rehberger went on to 
say that a rational marketplace would never undertake such an 
effort, but, I think, Mr. Putala, the question is isn't 
EarthLink going to--actually doing this right now? And what 
would be your response to his comment?
    Mr. Putala. We would note that we are trying to build out a 
new WiFi municipal network. They are working in partnership 
with cities around the country. But, we still rely on 
commercial arrangements with folks like SBC so that we can 
reach the vast majority of our members. The municipal WiFi 
initiatives are literally--we don't break ground in 
Philadelphia for another few months. We are trying to build out 
these new networks to have new options, new pipes, to more 
homes, which I think improves everybody's market conditions.
    Mr. Stearns. Would I be fair to say though, based upon what 
you are doing in Philadelphia, that you are sort of 
contradicting what Mr. Rehberger says or not? Do you agree with 
him or disagree with his statement?
    Mr. Rehberger. Might I clarify?
    Mr. Stearns. Well, I am going to give you a chance.
    Mr. Rehberger. Okay.
    Mr. Stearns. I am just trying to put it to Mr. Putala----
    Mr. Putala. I don't----
    Mr. Stearns. So he basically says that you are irrational 
for doing this because it doesn't make economic sense----
    Mr. Putala. Well----
    Mr. Stearns. [continuing] yet I think you are doing this--
EarthLink is doing this in Philadelphia.
    Mr. Putala. COMCAST also said we were irrational for doing 
it in Philadelphia.
    Mr. Stearns. Okay.
    Mr. Putala. But it is going to be a challenge. It is going 
to be hard, and I think that we are years away from having the 
same kind of ubiquitous connections to--with multiple pipes to 
everybody's home----
    Mr. Stearns. So you agree with him then? You would agree 
with him or disagree with him?
    Mr. Putala. I would agree with him that the challenges of 
building out new networks are significant indeed.
    Mr. Stearns. Okay. Mr. Krause, my understanding is that 
Alcatel's services as a vendor for WiFi and other wireless 
systems. You have services for these. Do you agree with Mr. 
Putala and Mr. Rehberger in billing out these particular WiFi 
systems?
    Mr. Krause. There are a number of technology domains in 
which we are involved, both wireless and wireline, so we are 
involved in----
    Mr. Stearns. Yes.
    Mr. Krause. [continuing] the WiMax partnership.
    Mr. Stearns. Does it make economic sense for you to do 
this? Do you sort of feel it does make economic sense, or are 
you saying that you perhaps agree with Mr. Rehberger and 
perhaps with what Mr. Putala's saying, it just makes no 
economic sense, but they are still going ahead. I mean, what is 
your position here? I mean, can you come out----
    Mr. Krause. On the wireless?
    Mr. Stearns. Yes.
    Mr. Krause. Yes, on the wireless side, especially given the 
recent movement on the digital television transition so that we 
are opening up some spectrum. There are some great technologies 
becoming available that will make reasonable business cases 
possible for delivering certain kinds of service over wireless 
networks.
    Mr. Stearns. Okay. Mr. Salas? Here you are at Verizon 
Wireless and how do you feel about this? Do you think there is 
economic reality you are not paying attention to, or are you 
able to go ahead with WiFi wireless services?
    Mr. Salas. We have evaluated WiFi and what it takes and 
what it can provide and we have not found what we thought to be 
a compelling business case, and so we continue to watch. I have 
built a number of networks in my career. It is complicated. It 
is difficult. And there definitely is no free ride here, so I 
am anxious to see how others here pull this off and actually 
deliver a working system.
    Mr. Stearns. Okay. Mr. Rehberger, I will let you have the 
last word on that.
    Mr. Rehberger. Well, the essence of my comments really 
related to a ubiquitous network around the country, similarly 
situated to what the Bell companies have today, not only for 
consumers, but businesses, and my only point was this is why we 
need for competition. We need network sharing and we need 
network sharing with the right regulatory framework so that 
companies like ours and others like ours can share the network 
that--somebody used the word 100-year monopoly, okay, it took 
to get the Bells to build that. Nobody is going to build that 
same network again. Clearly, in certain cities, even in certain 
towns, there is an ability based on the geography, based on 
even the atmospherics, okay, in terms of using wireless, where 
there is an ability that you can build out certain pockets. But 
just as an example, you know, if a cell tower has--and I don't 
know these terms--but a cell tower might have two, or three or 
four T-1s with a service and cover a few city blocks. There are 
probably a thousandfold times worth of telecommunication 
packets in voice that would--that you could never service with 
a cell tower. So you are going to need fiber. You are going to 
need landlines. And you are going to need access, okay, to the 
last mile to the customer. And that is the issue from a 
telecommunications standpoint. We think this bill somehow--
this, you know, this idea that if you become a packet provider, 
you no longer have the uni-access which was under the Telecom 
Act of 1996, and there are implications that Bell companies can 
take away or have the ability not to offer even special access 
tariffs. It takes the competitors out of business. And those 
are the protections that caused the innovation and price 
cutting that Mr. Ellis mentioned at the beginning of his 
testimony. It wasn't the R Box that voluntarily cut prices. It 
wasn't the R Box that rolled out new technology. It was the 
vendor, it was the companies like ourselves in the early days 
like MCI and later on the Celex, that really brought to fore 
this technology change you are seeing today.
    Mr. Upton. Thank you. Ms. Cubin?
    Mr. Stupak. Mr. Chairman, what about this side?
    Mr. Upton. Everybody has had questions there. These members 
have not asked any questions yet. You have asked 5 minutes, 
right?
    Mr. Stupak. Right. But I thought you said you were going to 
add 1 minute.
    Mr. Upton. Well, Mr. Markey asked for 1 minute to clarify 
an earlier question.
    Mr. Stupak. Okay. And then I will ask----
    Mr. Upton. You have----
    Mr. Stupak. [continuing] for 1 minute to clarify a question 
I asked earlier after Ms. Cubin.
    Mr. Upton. Okay. Ms. Cubin?
    Ms. Cubin. Thank you, Mr. Chairman. I--everything I do here 
has to do with rural America and trying to make sure that rural 
America is served as well as urban America, and that we have 
all of the same benefits. Mr. Mitchell, I would like to start 
with you, and you said that you are providing broadband video 
software and equipment to Comcast, Verizon and to SBC. Do you 
have any rural customers right now?
    Mr. Mitchell. We do not. Actually, just for clarification, 
we don't supply equipment, just software.
    Ms. Cubin. Oh, just software?
    Mr. Mitchell. And at this point, our customers--our 
announced customers are Comcast, Verizon and SBC in this 
country.
    Ms. Cubin. Realistically, can mid- or small rural companies 
buy your technology today?
    Mr. Mitchell. Yes, absolutely. The----
    Ms. Cubin. Now, realistically?
    Mr. Mitchell. Realistically, our technology is in the--the 
IP technology is in the early roll-out stages, and it will take 
some time to scale that out, but ideally we would like every 
operator to be able to take advantage of the software and to be 
able to support them in that role-out.
    Ms. Cubin. Well, ideally, I would like that too, and I will 
be watching.
    Mr. Mitchell. Yes.
    Ms. Cubin. Mr. Yager, many of the small Telcos in my 
district tell me that they have a very difficult time, if not 
impossible time, to negotiate retransmission agreements with 
their programming. You know, I mean with networks. Is there a 
reason that you can tell me from any of these perspectives why 
that is?
    Mr. Yager. Not really. I can't, not knowing the specifics.
    Ms. Cubin. Well, I don't want to name any specific 
networks, but what I'm kind of thinking is that there are a lot 
of little small companies that they just don't want to be 
bothered with.
    Mr. Yager. Well, under the Law, if the cable system has 
less than 1,000 subscribers, there is no re-tranmission consent 
or must-carry requirement in effect. And so as you get into 
rural areas, for the most part, the smaller cable companies are 
not affected at all by must-carry or retransmission.
    Ms. Cubin. I am talking about over 1,000 customers.
    Mr. Yager. Okay. If it is over 1,000, without knowing the 
specifics, I know of only--the gentleman on my right has just 
negotiated a contract with somebody who withheld their services 
for 7 or 8 months, but I don't know of any in the Wyoming area 
who have withheld their service from the cable companies. I 
mean either on retrans or must-carry.
    Ms. Cubin. Okay. I am not--well, I will check further into 
that because----
    Mr. Yager. That would be----
    Ms. Cubin. [continuing] I have received complaints and the 
complaints are directed at actually a specific network, and so 
I will just talk to you privately as to----
    Mr. Yager. That is fine.
    Ms. Cubin. [continuing] whether or not----
    Mr. Yager. I would be happy to----
    Ms. Cubin. [continuing] that is----
    Mr. Yager. [continuing] look into it for you because----
    Ms. Cubin. Okay.
    Mr. Yager. I am not aware of any in Wyoming at all that 
have withheld.
    Ms. Cubin. Okay. Small companies want to pool their 
resources and share a head end. Does NAB have any policy 
prohibiting this at all?
    Mr. Yager. No, we do not. If they--but if they pooled their 
resources, shared a head end, and hand over 1,000 subscribers, 
then they would be subject to retransmission and----
    Ms. Cubin. Exactly.
    Mr. Yager. [continuing] Must-carry requirements.
    Ms. Cubin. Right. Do broadcasters have any concerns about 
their signals being carried on an IP network?
    Mr. Yager. Again, we are looking for a level playing field 
for everyone, and the answer is, providing that the playing 
field is level, that we have retrans and must-carry rights 
across all video providers. No, we do not have any problem with 
that.
    Ms. Cubin. Good. Thank you, Mr. Chairman. I don't have 
anything further.
    Mr. Upton. Mr. Walden?
    Mr. Walden. Thank you, Mr. Chairman. Mr. Yager I want to 
follow up on that because I am trying to figure out--I am a, 
you know, I am a radio guy, not a TV guy so stick with me on 
this video stuff. I am trying to figure out though if local--
and the local is a really important issue for broadcasters, 
especially television broadcasters, and if your programming is 
put up on the Internet somehow, and I can dial into your 
station here in Washington, D.C., and watch whatever you have, 
isn't that a problem?
    Mr. Yager. Well, that is a major problem if the Internet 
takes a network program into an area that we are----
    Mr. Walden. Right.
    Mr. Yager. [continuing] licensed for with our network or 
contracted----
    Mr. Walden. Right.
    Mr. Yager. [continuing] with our network. That would be a 
major problem.
    Mr. Walden. And so how do you stop that in this 
environment?
    Mr. Yager. Technically, I can't speak to it, but we have 
stopped it so far. I mean, Internet providers are not carrying 
network programming outside--a matter of fact, I am not sure if 
they are even carrying it. There was a case, as you all know, 
that New Orleans, when Katrina hit----
    Mr. Walden. Right.
    Mr. Yager. --WWL and WDSU put their continuous news 
coverage on the Internet but there was no network----
    Mr. Walden. That is locally originated.
    Ms. Yager. All local originated programs.
    Mr. Walden. But is there any prohibition of an IP provider 
from doing----
    Mr. Yager. Yes. If an IP provider were to take our signals 
without our permission and put them on there, they would be 
violating the retransmission consent laws and that is where we 
would have control over who gets to see our network----
    Mr. Walden. All right. So you are not too concerned about 
that issue.
    Mr. Yager. Well, I am always concerned about the pirating 
of our signals, and as Congressman Cubin knows, and I would be 
very concerned in Wyoming that the Colorado or Denver stations 
be brought into all of Wyoming in stations----
    Mr. Walden. Right.
    Mr. Yager. [continuing] in Cheyenne and Casper would then--
would lose their network-based service----
    Mr. Walden. But that is----
    Mr. Yager. [continuing] and would lose its syndicated 
programming rights before we contact for people like Oprah 
Winfrey Show and----
    Mr. Walden. Yes. I mean, I have enough of those issues with 
XM and Sirius dropping programs----
    Mr. Yager. I understand that.
    Mr. Walden. [continuing] in on top of where I thought I had 
market exclusivity for the product I am buying. But, that is 
another subject for another day. Mr. Mitchell, do you support 
broadband video service providers being required to integrate 
Internet access into the broadband video service? Is that 
something Microsoft supports?
    Mr. Mitchell. I don't think that forcing an integration of 
disparate services together is the right way to go. For one 
thing, it is not clear that consumers actually want that force-
cum combination. I think making it available, having an option, 
is perhaps a nice thing if it makes good business sense. But, 
legit, just forcing it together, no.
    Mr. Walden. Okay. One of the concerns I obviously hear 
about, in addition to every city in my district, I have gotten 
the same paragraph from--individualized, of course--but concern 
about franchise fees and about PEG and all of that. I even--
some of them apparently have my Blackberry address so I will 
have to figure that out. But, Mr. Mitchell, I wondered--the 
other issue that comes up a lot is E911, and how are the E911 
requirements tailored, if the E911 requirements play to VoIP, 
do they have any--do you have any concerns about types of 
services that can be included in the bill's definition of VoIP? 
Do other people have comments on that issue?
    Mr. Mitchell. Well, I think my sort of overarching comment 
regarding any services like E911 that are--like 911--that are 
attached to phone service as we know it today, traditional 
telephone service, that you apply the E911, or, you know, 
future versions through services that are substitutive--
substantially substitutive, so my examples are, you know, the 
Xbox, Instant Messaging clients, Xbox Live Game Services that 
do not make sense to apply those kinds of provisions to because 
they are not substantive----
    Mr. Walden. Well, if it works like a phone----
    Mr. Mitchell. If you have the expectation that you pick it 
up and you dial 911 and you get somewhere, you pick it up and 
you dial 1-800-Dominos, you get Dominos. You know, then it is a 
phone.
    Mr. Walden. All right.
    Mr. Mitchell. So----
    Mr. Walden. Substitution test. Ms.--is it Praisner? I am 
sorry.
    Ms. Praisner. Praisner.
    Mr. Walden. At the beginning, how many franchise fees--one 
of the--and this is really difficult stuff for me because you 
have incumbent providers that go clear back to Marconi. Not Mr. 
Yager himself, but Marconi, and then everybody says then----
    Mr. Praisner. You and I won't care then.
    Mr. Walden. [continuing] comes in--I mean, you don't pay a 
franchise fee to have broadcast signal, but cable shows up with 
wire and they, you know, disturb your streets and whatever 
they--he doesn't, but others probably have, and--what about 
satellite video providers? You don't have a franchise on them, 
do you?
    Ms. Praisner. No. They also don't provide local PEG 
channels.
    Mr. Walden. That is true.
    Ms. Praisner. And that is the big----
    Mr. Walden. Is that really the issue here?
    Ms. Praisner. Well, that is part of the issue.
    Mr. Walden. The other part is just the revenue----
    Ms. Praisner. The right-of-way issue and the way you 
calculate a social obligation and participation in that social 
obligation.
    Mr. Walden. All right. All right. Thank you.
    Ms. Praisner. Thank you.
    Mr. Walden. I am out of time. Thank you, all. I appreciate 
your testimony.
    Mr. Upton. Before we adjourn this panel, Mr. Stupak has one 
last question to clarify.
    Mr. Stupak. I thank you, Mr. Chairman. I appreciate the 
courtesy. Since in the 1996 Act, myself and Mr. Barton wrote 
the right-of-way provision that became part of the 1996 Act. So 
I want to ask Ms. Praisner, because Ms. Blackburn asked a 
question about the rights-of-way and I don't--I was watching in 
my office and I didn't think you had a chance to explain it, 
and I want to make it--explain to us all how it works in the 
real world.
    If you look at page 61 of the draft, it says that the 
service provider shall ensure the safety of the property. So 
even if the local government has the opportunity to enforce the 
provision after in effect, how does it work in the real world? 
Could you explain that for us? Because I think it would be----
    Ms. Praisner. Well----
    Mr. Stupak. [continuing] beneficial for most of us.
    Ms. Praisner. [continuing] right now, of course, there is 
an--franchise agreement with the local government with 
requirements for the right-of-way management issues and 
requirements as far as when they come in for permits what, 
where, and how they will dig, and a variety of issues. And 
there is also the relationship that has some obligations 
because it is a contractual relationship for rent of the local 
right-of-way.
    The concern with that language is that although there is 
language on the next page that seems to suggest that the local 
government has some capacity, the way this is written is--and 
as I indicated to the Chairman, we are more than happy to work 
through. The way this is written, it is the local--it is the 
provider who shall ensure and I am not sure to whom and how and 
it would seem to me that it should be the local government 
setting the requirements from a public safety perspective. 
Because our rights-of-way right now are obviously a very 
important issue. They always have been. But in this era of 
post-9/11, the issues of public safety and access through those 
rights-of-way are even more critical.
    Mr. Stupak. Thank you. And thank you, Mr. Chairman.
    Mr. Upton. Just one note. I think that that is the same 
language we got from the Cable Act. I think it is pretty much 
identical. But we will continue to work and I am happy to say 
we are going to hear again in about 5 seconds, the votes. There 
it is. See? And this panel is now excused. And we have a series 
of votes on the House floor, so we will start the second panel 
at 3:10.
    [Brief recess]
    Mr. Upton. I know other members are watching from their 
offices as I often do at this point. So now that they see we 
are going to get started, they are going to listen attentively 
and come down and ask questions. It has been a long day. I 
understand at least one of you has to leave early to get a 
plane to go back. So we will start the time clock.
    Again, we appreciate the testimony that has come in. And I 
should say for those watching, we are joined by Dr. Frank Bowe, 
Professor, School of Education and Allied Human Services, from 
Hofstra University; Mr. Tony Clark, President of the North 
Dakota Public Service Commission, on behalf of the National 
Association of Regulatory Utility Commissioners; Mr. Harry 
``Hap'' Haasch, great guy from the good State of Michigan, 
Executive Director of the Community Access Center in Kalamazoo 
for the Alliance for Community Media; Mr. Gene Kimmelman, 
Senior Director of Public Policy, the Consumers Union; Mr. 
Delbert Wilson, General Manager of Industry Telephone Company; 
and Mr. Joel Wiginton, Vice President and Senior Counsel for 
Sony. Dr. Bowe, let us start with you. Welcome.

  STATEMENTS OF FRANK G. BOWE, PROFESSOR, SCHOOL OF EDUCATION 
AND ALLIED HUMAN SERVICES; TONY CLARK, PRESIDENT, NORTH DAKOTA 
 PUBLIC SERVICE COMMISSION; HARRY HASSCH, EXECUTIVE DIRECTOR, 
  COMMUNITY ACCESS CENTER; GENE KIMMELMAN, SENIOR DIRECTOR OF 
    PUBLIC POLICY, CONSUMERS UNION; DELBERT WILSON, GENERAL 
MANAGER, INDUSTRY TELEPHONE COMPANY; AND JOEL K. WIGINTON, VICE 
         PRESIDENT AND SENIOR COUNSEL, SONY ELECTRONICS

    Mr. Bowe. Thank you, sir. Mr. Chairman, thank you for the 
hearing and for inviting me. And I do want to extend that also 
to the members on both sides. I'm appearing today on behalf of 
a large number of organizations, people with disabilities, a 
very wide range of groups. And we all want to say we are very 
deeply appreciative of the language in the staff draft. Both 
the first draft and the second draft have some very positive, 
extremely meaningful language, in Section 207 and 405 
especially. But it is very important language and it was not 
weakened at all from the first draft to the second draft. The 
disability community is really very, very delighted to see 
that. And we also want to tell you in light of all the comments 
this morning about some bipartisan friction here, but we have 
to end the friction at all between minority and majority sides. 
On the disability language, we have seen them working together 
very cooperatively and very effectively.
    I want to say that going back with the 1996 Act, people 
with disabilities have always had to look to this Congress for 
accessibility language even though there are all kinds of 
millions of people with disability. Although so many 
disabilities, so many different levels of need, that we have 
never been able to get what we need from the marketplace. 
Rather, what we need here is a final accessibility language, 
and it is very important that we get it.
    The third point I want to make is that the language that we 
have, accessibility now in the many--applies specifically and 
almost exclusively to the public's telephone network. But 
people with disabilities today are using the Internet. We are 
using technology that did not exist in 1996. And so we 
increasingly--we are living in a world beyond statutory and 
regulatory provisions for accessibility for people with 
disabilities. So we firmly need legislation, very important to 
us that there be a law in making.
    And you may remember, Mr. Chairman, because you came to a 
demonstration that I did here in Rayburn. I did another one on 
the Senate side. And we have shaped most demonstrations about 
512--second, which is about one-third as big. Then Mr. Ellis 
was talking about providing to his customers. So we are able to 
get disability accessibility including for the--at the level 
that we now have DSL and cable modems. We are about to achieve 
it, however--and I really can't emphasize this enough, but 
technology continues to evolve so rapidly and so exponentially 
that you count on--law making passed on while the technology is 
right in front of you. You have got to do the law making based 
on the technology you know will be coming, and technologies 
that you may not know be coming. In other words, we have 
learned very much from the many--we really cannot have law 
making about the last wave. We have really got to try to make 
it about the next one.
    Give you an example, more and more videos now are being 
streamed over the Internet, and this is an example, this 
hearing. A number of people have told me they are not here but 
they are watching it on the Internet. Just one example of 
something that absolutely not in existence in 1996, which 
raises all kinds of questions, and one of which, very simply, 
is what about captioning? And we have captioning on television, 
cable, and satellite. All are captioned. But when you get to 
Internet streaming, it is not captioned. We now have some 30--
phones and other PDA devices, not captioned. That raises all 
kinds of questions, so we feel very strongly at Mr. Markey's--
the caption on your video is really much too important to spill 
over to the FCC's discretion, and for the FCC to have a chance 
to review it every 4 years. This should not be the case. 
Captioning should be something that is brought into the statute 
as it is in the 1996 Act. It should be in the statute.
    And while I am speaking of the 4-year review, that really 
should be two. Technology is developing so rapidly that to have 
a 4-year review is really much too infrequent.
    People with disabilities, what we need is high-speed--we 
need it on all connections, and I can't emphasize that enough. 
When I do sign language with someone else, I am doing peer-to-
peer. I am not doing--through the end of the cable 
architecture. It is a whole different arrangement than if I am 
doing peer-to-peer, I have to have high-speed in all directions 
and not just upstream and downstream. We will benefit in 
everyday communications and education on healthcare and in 
employment if we have these technologies, if we have them 
available everywhere, and if they are affordable. So thank you, 
Mr. Chairman and Mr. Markey.
    [The prepared statement of Frank G. Bowe follows:]
  Prepared Statement of Frank G. Bowe, Dr. Mervin Livingston Schloss 
              Distinguished Professor, Hofstra University
    Good afternoon, Mr. Chairman, Congressman Dingell and members of 
the Committee. My name is Frank Bowe, and I am pleased to appear today 
to provide invited testimony on the second staff draft of a bill to 
revise and extend the landmark Communications Act of 1934. I am a 
professor at Hofstra University, on Long Island. I am testifying on my 
own behalf. This testimony is supported by the Alliance for Public 
Technology, American Association of People with Disabilities, American 
Council of the Blind, American Foundation for the Blind, Association of 
Late-Deafened Adults, California Coalition of Agencies Serving the 
Deaf, Hard of Hearing, Inc., Communication Services for the Deaf, Deaf 
and Hard of Hearing Consumer Advocacy Network, Deaf and Hard of Hearing 
Service Center Inc., Inclusive Technologies, National Association of 
the Deaf, Northern Virginia Resource Center for Deaf and Hard of 
Hearing Persons, Self Help for Hard of Hearing People, TDI (also known 
as Telecommunications for the Deaf Inc.), WGBH National Center for 
Accessible Media, and World Institute on Disability. These 
organizations together represent millions of Americans with 
disabilities who have a vital interest in making sure that the 
communications technologies of today and tomorrow will meet their 
communication needs.
    Members of the Committee, our community has already come before you 
once this year to address accessibility issues, when Karen Peltz 
Strauss testified to the Subcommittee on Telecommunications and the 
Internet on April 27. My testimony builds upon her statement, with the 
important advantage of being able to applaud your staff draft's 
treatment of the issues she discussed.
    Permit me to preface my remarks by noting that Americans with 
disabilities are daily using, and greatly benefiting from, Internet-
enabled communications technologies that have emerged since enactment 
of the 1996 Telecommunications Act. When I demonstrated broadband two 
weeks ago in the Dirksen Senate Office Building, Senator Conrad Burns 
of Montana spoke movingly about a 12-county area in his State that did 
not have a single physician. Broadband, the Senator reported, is 
crucial to the well-being of his constituents. To illustrate, in the 
1970s Howard Rusk, a pioneer in rehabilitation medicine, told me that 
life expectancy for people with quadriplegia was about five years post-
injury. Today, it is a great deal longer, due to increased knowledge 
about how to treat such secondary conditions as autonomic dysreflexia. 
But that expertise is not universal among primary-care providers. It 
resides at the Rusk Institute at NYU, the Shepherd Center in Atlanta, 
and at the Rehabilitation Institute of Chicago. Broadband extends their 
ability to provide quality care to Dearborn, Michigan, and Cheyenne, 
Wyoming. To use another example, dermatoscopy takes pictures several 
skin layers deep. Broadband instantly transmits the images to a 
specialist. As a result, a dermatologist in Dallas/Fort Worth can 
diagnose a skin condition of a patient in Clearwater, Florida, as 
accurately as can a local one.
    Likely, those dozen counties in Montana do not have a single sign-
language interpreter, either. Broadband can connect consumers with 
interpreters irrespective of geographical location. This has the added 
advantage of eliminating the wasted travel time of interpreters, making 
them more available to meet our needs.
    Let me shift now to consumer use of the Internet and of broadband. 
A report this year by the Pew Internet and American Life Project found 
that 68 percent of adults use the Internet. The Census Bureau reported, 
on the same day that I demonstrated broadband in the Senate, that home 
access to the Internet has now passed the half-way mark nationwide. A 
large and rapidly growing proportion are broadband subscribers who use 
it not only for shopping but also for public policy participation, 
education, and communication with family, friends, and coworkers. For a 
glimpse into the near-term future, consider that the teen site 
MySpace.com had more hits in August than did Google: 9.4 billion page 
views. New users of the site are signing up at a rate of better than 
three million a month. This is yet another indication that broadband is 
here to stay.
    Here is my point: Consumers are driving the broadband engine. They 
are rapidly making broadband an indispensable part of the fabric of 
everyday life in this country. Consumers should have a seat at the 
table as broadband policy is set. That is why I so much appreciate the 
fact that the staff draft offers much-needed disability consumer 
protections. It is also why I appreciate this invitation to testify 
today.
    People with disabilities, simply stated, believe that broadband 
should be available everywhere, at affordable rates. Our aim should be 
to accelerate the creation of a broadband umbrella that covers the 
country. Our policy should be to regulate evenly across platforms, so 
as to ensure disability access across all communication platforms. This 
means applying the same standards to wireline, wireless, cable, and 
satellite providers and suppliers. That, in turn, necessitates federal 
rules for accessibility.
    People with disabilities, as well as their families--the Census 
Bureau reported this summer that 21 million American families include 
at least one person with a disability--friends, coworkers, and others, 
not to mention my students, will win with rapid deployment everywhere 
of broadband, particularly fiber to the curb and even to the home, 
featuring high speeds in all directions. It is not enough just to have 
it downstream, with much slower speeds upstream. Bidirectional peer to 
peer interactions at high speed enable each of us to be creators, and 
not just consumers, of broadband-provided content. While many of us 
use, and benefit from, today's level of DSL and cable-modem broadband, 
as I demonstrated to this Committee in June, and to the Senate Commerce 
Committee last month, high-speed connections in both directions, with 
rapidly refreshed frames, greatly improve video communications, 
particularly in sign language. In this as in other areas, we must bear 
firmly in mind a lesson learned from the 1996 Act: legislation needs to 
address, and foster, tomorrow's technologies and not just today's.
    With advanced telecommunications products and services, our daily 
lives will be improved, as we access more information, make better-
informed consumer choices, and enjoy much richer and more rewarding 
interactions with family and friends. Our education will no longer be 
limited to geographically proximate institutions. Our employment will 
be supported and our ability to work flexible schedules enhanced.
    Critical to these improvements are the disability consumer 
protections contained in the staff draft. The organizations supporting 
my testimony today greatly appreciate inclusion of protections in this 
draft to ensure that broadband products and services are accessible to 
and useable by people with disabilities. For example, the staff draft 
requires that video be captioned when it is streamed over the Internet, 
as it increasingly is. Currently, section 713 of the Communications Act 
mainly requires captioning only for broadcast, cable-cast, and 
satellite television programming, largely because Internet video was 
not available in 1996. Similarly, the staff draft, in section 207, 
defines relay services to include video, and not just text, 
communications for people who are deaf, hard of hearing, and/or speech-
impaired. It calls for interoperability of Internet-enabled relay 
services, including video relay.
    When Congress amended the Communications Act in 1996, it added 
section 255, calling for equipment and services to be accessible to and 
useable by people with disabilities. But to date, that section has been 
interpreted to apply only to the public switched telephone network, not 
to the Internet. This was, of course, because scarcely anyone used the 
Internet for voice or video communications in 1995 and early 1996. The 
staff draft, in section 405, extends these accessibility requirements 
to broadband products and services. And, recognizing that today's 
telecommunications products are electronic, into which accessibility 
can easily and readily be incorporated during the design stage, the 
staff draft requires that makers and providers of new broadband 
products and services provide access unless doing so would present them 
with an undue burden. The 1996 Act, reflecting an earlier era, one 
characterized by already-existing products and services, allowed a 
lower readily achievable standard. As Ms. Strauss noted in her April 
testimony, the fact that today's communications Internet Protocol 
technologies rely more on software-based solutions makes it easier, 
faster, and less costly to implement access features than had been 
possible with many previous telecommunications technologies
    All of this matters, and matters urgently. Just three out of every 
ten adults with disabilities today are employed. Broadband promises to 
help because it is always-on, high-speed, voice/video/data 
communications. Many deaf and hard of hearing Americans are using 
instant messaging daily, now video as well as text. They are signing to 
each other, using digital video cameras and webcams. Signing over video 
connections offers the closest possible functional equivalence to voice 
telephony between persons who can hear. In the workplace, IM and video 
conferencing permit instant accessibility. They lower the cost to 
employers of accommodating a worker who is deaf, by alleviating the 
need for interpreting services except for formal, in-person meetings.
    The House draft access language for broadband equipment and 
services is vital for people who are blind or visually impaired who 
must often struggle with graphical-only interfaces or other 
inaccessible equipment and service which, increasingly, restrict access 
to vital broadband communications. In addition, because broadband is 
digital, it also speeds up conversion of written material into formats 
that people who are blind can use--large print, speech, and even 
Braille. This lowers the cost to employers and educators of 
accommodating people who are blind or visually impaired.
    And of course broadband supports telecommuting. While some 
Americans with disabilities may not opt to telecommute, others will, 
because broadband helps people with chronic health conditions or 
physical disabilities to expend far less energy in nonproductive 
commutes and to leapfrog those transportation and architectural 
barriers which remain.
    With respect to education, the 2004 reauthorization of the 
Individuals with Disabilities Education Act explicitly permits video 
conferencing for Individualized Education Program (IEP) team meetings. 
Teens with disabilities may participate in video conferencing sessions, 
as may parents with disabilities, through broadband-enabled access, 
including remote interpreting and document accessibility. As a 
university professor, I am daily reminded how colleges increasingly use 
electronic media for everything from course registration to assigned 
readings to submission of student work. I found it necessary this fall 
to write, for Hofstra University, a primer on how to make our 
Internet2-based digital environment accessible to students, staff and 
faculty with disabilities. I see a similar need here. Broadband, if 
made accessible in the ways envisioned by the staff draft, will greatly 
contribute to the post-secondary education of people with disabilities.
    Broadband, I am convinced, will not only improve the quality of 
medical care for our most vulnerable citizens but also will help to 
conserve public resources. To illustrate, while people with 
disabilities account for 16% of Medicaid beneficiaries, because their 
annual medical costs are higher than are those of Medicaid recipients 
who do not have disabilities, their care accounts for 43% of Medicaid 
spending. In 2003, for example, Medicaid costs for persons with 
disabilities added up to $80 billion. Broadband will help us to enhance 
quality of services while also constraining costs. It will do so by 
enhancing preventative care, by permitting better monitoring of 
people's health, and by enabling them to live and work more 
productively.
    Broadband helps older Americans live at home longer, by affording 
them instant contact with family and caregivers, reducing costs of 
institutional care. Similarly, wireless broadband supports independent 
living in the community of persons with intellectual disabilities and 
many with mental and emotional disorders. This includes individuals who 
were deinstitutionalized pursuant to the Supreme Court's 1999 decision 
at Olmstead. Two cell phones, the TicTalk, from Enfora, and the 
Firefly, from Firefly Mobile, are illustrative. Each has just a few 
buttons. Each is pre-programmed with numbers for family, employer and 
emergency support personnel. By touching just one button, a person can 
instantly be in two-way communication to ask questions, receive 
directions, and request in-person assistance. These cell phones promise 
to allow a small team of counselors to provide independent-living and 
employment support to a large number of individuals in a community, at 
much lower per-person, per-year support costs than are otherwise 
available. Manufacturers could add two-way video to these handhelds, 
for even easier and more effective two-way communication.
    Before I close, let me not overlook universal service. I know that 
this Committee and the Federal Communications Commission as well prefer 
to deal with universal service next year rather than this. Universal 
service is absolutely essential to the continued vibrancy of our 
Nation's public communications. We must find ways to protect and 
preserve it despite present threats to its funding base as our nation 
shifts to Internet-enabled communications technologies. Specifically, 
we must make sure that providers of these technologies are equally 
bound to contribute to the support of universal service programs, 
including relay services, that are designed to make communications 
accessible and affordable for all Americans.
    In closing, let me thank you for considering our views and, in the 
staff draft, for responding to the needs of people with disabilities. 
For Americans with disabilities, a new national policy on broadband is 
urgently needed. Many of the communications technologies we use today, 
and those we are excited to think about using tomorrow, have and will 
emerge in the post 1996 Telecom Act ``world''. Critically important 
disability access provisions will exist only if Congress enacts an 
updated framework for telecommunications.
    Thank you.

    Mr. Upton. Thank you. We appreciate your testimony, for 
sure, and appreciate your wonderful work in this issue over the 
years. And I have--I know Mr. Engel and I, Mr. Markey, too, 
have all appreciated your leadership and participated in your 
demonstrations. Mr. Clark?
    Mr. Bowe. Thank you.

                     STATEMENT OF TONY CLARK

    Mr. Clark. Thank you, Mr. Chairman. It is an honor to be 
here, and I thank you for the invitation--and Mr. Markey as 
well. It is especially an honor to be before your committee 
because, although I have been proud to call North Dakota home 
for about the past 20 years, there are an awful lot of Clarks, 
both present and past, who call Michigan home, so it is a State 
that I certainly have a very warm spot in my heart for.
    Today I am here to represent----
    Mr. Upton. You are supposed to go like this.
    Mr. Clark. All right.
    Mr. Upton. Where you are from.
    Mr. Clark. Alpina, Towwes, and all points in between. It 
can be somewhat of an intimidating thing to try to represent 
quote/unquote the view of the States or the State Commissions, 
because it is sort of like asking someone, well, what is the 
view of Congress. Well, we are an organization and association 
which is made up of 50 different States, some of us 
Republicans, some of Democrats, some appointed, some elected. 
So what I will try to do in just a very brief overview of our 
written testimony is to highlight those points where there 
seems to be some consensus amongst State regulators, and to the 
extent that there may not be consensus, if I offer sort of my 
own opining as one State official, I will try to identify that 
as well.
    Clearly, telecommunications markets are changing, and the 
old regulatory constructs that we have had, both at the Federal 
and State level, are crumbling around that technological 
innovation that has happened. And in response to that, State 
regulators have, I think, a very commendable job of trying to 
assess where the markets are today, what are roles are and 
perhaps should be, and what the Federal role is and perhaps 
should be in any future Telecom Act. We have come out with a 
set of principles that we think should be embodied in any 
changed to the Telecommunications Act of 1996, and I would just 
really highlight two main points that State Utility 
Commissioners seem to have general agreement upon.
    The first is that whatever happens on a going-forward basis 
should be technologically neutral, that the means of 
transmission really shouldn't be the important and the driving 
factor. And to the extent that there are regulations that are 
placed on telecommunications, the things that State Utility 
Commissioners look at as really the most important factors 
where there probably will be the most regulatory intersect on 
some level or another is where there are an essential service 
provided. And when we say essential service, honestly, what we 
are probably talking about is some sort of either POTS--plain 
old telephone service--or a replacement for that sort of one 
basic primary line that consumers have access to, where there 
is critical infrastructure involved and where there is some 
sort of market power. Where any one of those things doesn't 
exist, the need for regulation goes away. States have been 
stepping back in dramatic fashion from economic regulation, and 
we would anticipate that that would continue to be so.
    Once there is determined that there should be some sort of 
regulation, then what we have asked is that there be an 
analysis of core competencies, who does what best. We have 
stepped forward and said that we really believe that old end-
point jurisdictions, interstate versus intrastate, it just 
doesn't make much sense anymore in today's Telecom market. 
Really what we should be looking at is who does what best? What 
level of government? And to that end, we have said that we 
think the Federal Government job does a pretty good job 
probably of setting some standards, and maybe more of that has 
to take place, but that State government and State commissions 
have really historically been the best at adjudicating specific 
issues and enforcement measures, at building records, and at 
carrying forward in a very fact-specific manner anything that 
may come up that we can't predict today.
    As far as sort of what we see good in the draft, what we 
see potentially needing some more work, we do appreciate that 
it establishes a baseline on some social service policies like 
E911, Universal Service, and we appreciate the fact that it 
does acknowledge the core competency of State commissions, 
which is often enforcement, although we would like to see 
perhaps more flexibility for States to deal with specific 
situations. And where we see more work needed is something that 
has been talked about a number of times here today, but is 
concern about that just throwing in a new silo which could 
create these same types of arbitration that we have seen in the 
past rather than looking at things from a more structural and 
holistic standpoint.
    With that, I will look forward to any questions you might 
have.
    [The prepared statement of Tony Clark follows:]
 Prepared Statement of Hon. Tony Clark, President, North Dakota Public 
Service Commission and Chairman, Telecommunications Committee, National 
            Association of Regulatory Utility Commissioners
    Chairman Upton, Ranking Member Markey and members of the 
Subcommittee, thank you for the opportunity to testify today. I am Tony 
Clark, chairman of the NARUC Telecommunications Committee and president 
of the North Dakota Public Service Commission. NARUC represents State 
utility commissions in all 50 States and US territories, with oversight 
over telecommunications, energy, water and other utilities.
    We appreciate the opportunity to share our perspective and insights 
about the staff discussion draft on Internet protocol and broadband 
services, which we view as the beginning of an important dialogue at 
this Subcommittee about the appropriate legal and regulatory framework 
to encourage innovation and protect consumers in today's evolving 
communications market.
    The telecommunications industry as we know it is undergoing 
tremendous transformation and restructuring. The long-distance industry 
has mostly disappeared and once mighty competitors are being absorbed 
by their former adversaries in the local phone business. New players 
have emerged in the nascent ``nomadic'' VOIP industry and a growing 
number of younger consumers are ``cutting the cord'' to use their 
wireless phone as their only phone.
    Today's marquee battle is the grand duel between cable and baby 
Bell companies over who will dominate the ``triple play'' or 
``quadruple play'' market of voice, video, data and wireless bundles, 
but this battle could easily give way to one between the network owners 
and the ``edge'' providers like Yahoo!, Google and Microsoft whose next 
wave of disruptive technologies could turn today's giants into 
commodity providers. Or new wireless broadband offerings could flood 
the market with ``last mile'' transmission options, driving prices down 
and leading to another round of consolidation. Just last week, Sprint-
Nextel announced a joint venture with four cable companies to deliver 
TV shows on cell phones, and BellSouth's chief technology officer 
referred to a search engine company as a serious potential competitor.
    NARUC's members have embraced this new paradigm of innovation and 
change because we see it as a powerful engine of economic development 
and consumer empowerment in each of our States. Recognizing these 
seismic changes and a corresponding interest from Congressional leaders 
to reexamine the foundations of the Communications Act, NARUC 
commissioned a Legislative Task Force last year to take stock of the 
current legal and regulatory baseline and make recommendations on 
whether and how it should be revised. After listening to numerous 
stakeholders and intensive internal discussions, the Legislative Task 
Force reached two important conclusions:
    The first was that any broad reform must be technology neutral. 
Even the leading luminaries and entrepreneurs in the telecommunications 
industry don't know where today's transformation will lead or end. In 
the chaos that is the genius of modern capitalism, they are constantly 
placing bets, forming new ventures, making mid-course corrections and 
sometimes losing big money when things don't turn out as expected. With 
that in mind, it struck us as untenable for policymakers to build a 
framework around any kind of technology, even a widely deployed one 
like Internet protocol. Such an approach would invariably choose 
winners and losers and ultimately distort investment decisions as 
capital and energy flowed to products in the best regulatory ``silo.''
    The second conclusion was the development of our ``functional 
federalism'' concept, which is the idea that if Congress is going to 
rewrite the Telecommunications Act, it doesn't have to be bound by 
traditional distinctions of ``interstate'' and ``intrastate,'' or 
figure out a way to isolate the intrastate components of the service. 
Instead, a federal framework should look to the core competencies of 
agencies at each level of government--State, federal and local--and 
assign regulatory functions on the basis of who is properly situated to 
perform each function most effectively. In that model, States excel at 
responsive consumer protection, efficiently resolving intercarrier 
disputes, ensuring public safety, assessing the level of competition in 
local markets and tailoring national universal service and other goals 
to the fact-specific circumstances of each State. Economic regulation 
is necessary only where there is market power and if robust competition 
one day removes the need for economic regulation of all types, we 
believe that will be a good thing.
    This is not actually a new model. For the past several years, 
wireless carriers have been governed under Section 332 of the Act, 
which does not declare wireless to be interstate, but rather assigns 
appropriate functions to State and federal authorities. It assigns 
spectrum management functions to federal authorities, includes a 
rebuttable presumption of competitiveness for wireless carriers, and 
allows states to handle consumer protection and other terms and 
conditions of service. Wireless carriers are also allowed to avail 
themselves of State arbitration procedures for interconnection to the 
wireline phone network. Under this model, the wireless industry has 
already eclipsed the traditional phone business in total number of 
subscribers and is only growing stronger.
    While NARUC's members are still analyzing the discussion draft, we 
want to raise a number of high level issues and serious concerns. 
First, we are concerned that this discussion draft is very technology 
specific by according special status to any service or infrastructure 
that utilizes ``packet switching.'' While packet switching is 
supplanting circuit-switching and time-division multiplexing today, 
something else that may or may not be a successor protocol is 
invariably in the queue behind it. While it might take longer and 
require more dialogue among disparate stakeholders, we encourage you 
instead to pursue a technology-neutral approach that looks to the 
salient features of each service, such as whether it has market power, 
whether it is interconnected to the Public-Switched Telephone Network 
(PSTN) or its successor, and whether it is selling access to networks 
supported by universal service.
Consumer protection:
    We commend the staff for recognizing State expertise and experience 
and the vital role we play in handling consumer complaints. A recent 
survey found that in just 20 State commissions, over 230,000 consumer 
complaints had been handled in 2004. These complaints are generally 
resolved on a one-for-one basis and the majority take only a few weeks 
through informal processes.
    We are concerned, however, that the discussion draft takes a ``one-
size-fits-all'' approach when it comes to consumer protection 
standards, without providing flexibility to the State agencies that 
enforce them. This is unfortunate because the same dynamism that brings 
exciting new products and services to consumers also produces a host of 
new complaints and novel misunderstandings, especially for products 
supplanting traditional phone service.
    A particular case in point has been the national do-not-call list, 
enacted two years ago with great fanfare. Federal agencies, although 
they receive thousands of complaints a week, have issued only six (6) 
fines since its enactment, and States have provided the bulk of its 
enforcement. Even more importantly from the consumer's viewpoint, 
telemarketers were quick to exploit a patchwork of loopholes and 
``workarounds'' to the federal rules and the calls kept coming. It fell 
to a handful of States to say that ``no means no'' could not be 
circumvented just because the consumer had made a purchase from the 
company 18 months ago or because the call was pre-recorded (which might 
actually be more annoying). Without that State flexibility, consumers 
would be in a much worse position.
    NARUC doesn't object to federal consumer protection standards, but 
we do object to an approach that makes those standards a ``ceiling'' on 
State action and fails to give those who help consumers the tools, 
authority and flexibility they need to get the job done.
Interconnection:
    We commend the staff for including interconnection rights between 
and among BITS, VOIP and telecom providers. In a networked industry, 
fierce competitors will always have to cooperate to operate a seamless 
network of networks, but there are frequent perverse incentives for one 
carrier or another to frustrate interconnection for anti-competitive 
reasons.
    We are very concerned, however, that the draft federalizes the 
traditional State role of mediating, arbitrating and enforcing those 
interconnection agreements. Current law already includes a provision 
for the FCC to arbitrate interconnection agreements when the State 
commission does not act, but the isolated instances where this has been 
necessary have not generally gone well. In one case, a cable company in 
the competitive phone business had to spend 3 years and over $2 million 
to arbitrate an interconnection dispute at the FCC, even though it was 
eventually vindicated on every issue. Sending such disputes to federal 
courts or another forum would be even more onerous, with discovery 
rules and a multi-year process for resolving disputes that could be 
adjudicated in a matter of weeks at a State commission. We are 
concerned about the ripple effect that a backlog of such cases would 
have on the entire industry, especially when some traditional phone 
providers are already seeking to deny interconnection altogether to new 
competitors. The ability to interconnect seamlessly into the 
traditional phone system is the linchpin of success for many VOIP 
services.
Connectivity principles:
    We applaud the staff for including proscriptions against blatant 
digital protectionism by network owners. Many broadband providers are 
under tremendous investor pressure to drive as many customers as 
possible to their proprietary voice, video and data products. While 
consumers can benefit from ``intelligent networks'' and compelling 
proprietary products, we hope the network owners' competitive 
strategies will turn on price, quality and features--not impairing 
competitors' products or imposing artificial bandwidth limits on 
consumers.
Public Safety:
    We support the inclusion of an obligation for VOIP providers to 
provide 911 / E-911 capabilities to their consumers, and we commend the 
staff for preserving State and local assessment authority to continue 
supporting and upgrading the PSAP systems, but we are very concerned 
that the bill includes no State role to enforce those obligations and 
leaves the mediation and arbitration of interconnection to such 
facilities at the federal level. As discussed above, federalizing all 
the arbitration cases could lead to a dangerous backlog of arbitration 
requests. The need for a fast and effective dispute resolution 
procedure is even more acute with the 911/E-911 system because the 
provider that controls the trunk lines and selective router has a 100% 
monopoly over these elements, and competitors need that access to do 
business--and it is always a local call.
Universal service:
    NARUC supports efforts to more equitably distribute the funding 
base of the federal Universal Service Fund (USF) in a technology-
neutral manner, although we believe such efforts must be accommodated 
by similar efforts to ensure the long-term sustainability of State 
programs. Today, universal service is a jointly shared responsibility 
between the States and the federal government, with 26 State programs 
distributing about $2 billion--or 28% of the overall national 
commitment to universal service. This joint approach benefits both 
``net donor'' and ``net recipient'' states because it lessens the 
burden on an already sizable federal program and permits another option 
when federal disbursement formulas that ``work'' in the aggregate do 
not adequately serve a particular state or community.
    Our concern is that any expansion of the federal base without a 
complementary clarification of State authority could create tremendous 
funding gaps. The impact of those gaps would fall disproportionately on 
consumers who rely on State programs, and would raise thorny questions 
about the equity of federal disbursement formulas.
Conclusion:
    In conclusion, we appreciate your thoughtful consideration of our 
input and look forward to continuing a fruitful dialogue over the 
discussion draft and all the issues that it raises with the members of 
the Energy and Commerce Committee. As a next step, we would be pleased 
to work with you and your staff on an approach that preserves the 
strong points of the discussion draft before us, but is technology 
neutral and includes more vigorous and flexible procedures for consumer 
protection, interconnection, public safety and universal service.

    Mr. Upton. Okay. Thank you. Mr. Haasch, welcome.

                    STATEMENT OF HARRY HAASCH

    Mr. Haasch. Does the microphone work? Hello? Good 
afternoon, Chairman Upton. Good afternoon, Chairman Upton, Mr. 
Markey, and members of the subcommittee. I am sorry. I don't 
think I need two. Take one. My name is Hap Haasch and I am the 
executive director of the Community Access Center in Kalamazoo, 
Michigan. And I want to thank Chairman Upton for inviting me to 
testify today on behalf of the Alliance for Community Media, a 
national membership organization representing 3,000 public 
education and government access centers across the country.
    Local PEG programmers produce 20,000 hours of new 
programming per week. That is more new programming than all of 
the broadcast networks combined. As you observed, Mr. Chairman, 
back in 1999, the Community Access Center in Kalamazoo provides 
a diverse programming schedule that can't be found anywhere 
else, reflecting a cross-section of society, and offering an 
empowering voice to those that may not otherwise have a chance 
to be heard. We believe the November 3 staff draft bill however 
might directly and substantially threaten the future of PEG 
programming throughout the nation. My testimony focuses 
primarily on the draft's PEG aspects. However, the Alliance 
supports the testimony of Counsel Member Praisner on behalf of 
local government organizations heard earlier today.
    Let me give you a couple of examples of significant PEG 
programming around the country that are replicated in almost 
every community. The Kalamazoo Community Access Center, the one 
that I manage, we have provided PEG access programming for 25 
years. We now average 2,100 hours per month of new programming. 
315 hours of that programming are brand new first-run. Just 
now, my staff is putting together a 4-camera live production 
shoot at the Kalamazoo Public Library, the major fundraiser of 
that organization in the community, that will combine staff, 
volunteers and interns for a 2-hour production that the local 
broadcast networks might give 30 seconds to.
    During the 2004 election season, Chicago Access Network 
Television, CAN TV, ran 160 hours of local election coverage, 
including information on candidates for Presidential, 
Senatorial, Congressional and local elections. Media bridges in 
Cincinnati, Ohio, cablecast more than 15,000 hours of local 
programming, including programming for more than 80 religious 
organizations. Cambridge, Massachusetts, produces 50 hours of 
live programming per week, shows that include Crime Time, 
produced by the Cambridge Police Department. In Southern 
Oregon, Rogue Valley TV is the public access organization for 4 
cities and 3 counties. They produce Rules of the Road by the 
Medford Police Department, a 1-hour monthly live call-in 
program primarily on traffic and pedestrian law. Albuquerque, 
New Mexico, Sandia Prep School begins its third year of 
producing the program Speak Out. It is the students that 
produce the program and provide all technical work on the 
series that features high school debate, dance, music 
performances including the orchestra.
    PEG access is only possible if there are adequate funds to 
support it. The overwhelming majority of PEG funding comes from 
two sources. The first is monetary and in-kind support from 
cable operator that is above and beyond the 5-percent franchise 
fee. That is a critically important point. The second revenue 
stream for PEG access is a contribution by the local 
franchising authority of a portion of the 5-percent franchise 
fee for PEG. The November 3 House draft bill, however, would 
eliminate one of those sources of revenue and substantially 
reduce the other in our estimation. The combined elimination of 
PEG grants and the substantial reduction of franchise fee 
revenue available for PEG would result in a funding reduction 
for PEG access that could be nothing short of catastrophic for 
some centers across the nation.
    Through the cable franchise process on capacity--PEG 
capacity issues, local communities, particularly in the renewal 
phase of their relationship, have analyzed their PEG access 
channel capacity needs and then adjusted their capacity in the 
final agreement coming out of renewal. The draft bill, however, 
would essentially kept PEG access capacity at current levels. 
This would have a particularly harsh effect on communities with 
older franchise agreements, many of which might currently have 
relatively few channels set aside for PEG. This is in an 
environment where there is exponentially increasing channel 
capacity on these new systems.
    In conclusion, you are right, Mr. Chairman, when you said 
that community access centers give a media voice to those who 
might otherwise not be heard. Across the nation, PEG access 
centers put television in the hands of the people, not as 
passive consumers--a word I heard often this afternoon--but as 
speakers and information providers. In its current form, the 
draft legislation threatens to silence those voices because it 
would undermine the continued financial viability of PEG access 
centers, particularly those funded above and beyond the 
franchise fee. We therefore ask that the draft be revised to 
ensure the continued viability of PEG access, the only truly 
genuine form of localism and diversity in the television 
medium.
    The Alliance looks forward to working with you in making 
the necessary changes on the legislation to protect PEG access. 
Thank you for inviting me.
    [The prepared statement of Harry Haasch follows:]
 Prepared Statement of Harry ``Hap'' Haasch on Behalf of The Alliance 
                          for Community Media
    Good morning, Chairman Upton, Mr. Markey and Members of the 
Subcommittee. I am Harry ``Hap'' Haasch, Executive Director of the 
Community Access Center serving the cities of Kalamazoo and Parchment 
and the townships of Oshtemo, Comstock and Kalamazoo, Michigan. I want 
to thank Chairman Upton for inviting me to testify today on behalf of 
the Alliance for Community Media, a national membership organization 
representing 3,000 public, educational and governmental (``PEG'') cable 
television access centers across the nation. Those centers include 1.2 
million volunteers and 250,000 community groups and organizations that 
provide PEG access television programming in local communities across 
the United States. Local PEG programmers produce 20,000 hours of new 
programs per week--that's more new programming than all of the 
broadcast networks combined. As reported in yesterday's New York Times:
        ``For every hour of ``Desperate Housewives'' on ABC, the 
        nation's 3,000 public-access television channels present dozens 
        of hours of local school board meetings, Little League games 
        and religious services. Not to mention programs like ``The 
        Great Grown-Up Spelling Bee,'' a spelling bee for adults that 
        raises money for the Kalamazoo, Mich., public library . . .''
    The Center for Creative Voices recently released a report that 
shows that as large group owners control more local broadcast stations 
in a market, local programming disappears, replaced by nationally 
produced programs that seek to draw larger audiences through more 
inflammatory material. Media consolidation furthers this trend. The 
report also found, however, that locally controlled programming is more 
responsive to community needs.
    Congress has traditionally recognized the need to foster localism 
in communications. At a time when studies show that less than 0.5% of 
programming on commercial television is local public affairs, PEG 
centers serve the people in your home town, city, and district.
    The November 3 Staff draft bill, however, would directly and 
substantially threaten the future of PEG programming throughout the 
nation. My testimony focuses only on the draft bill's provisions that 
would most directly impact PEG funding and capacity. There are other 
provisions in the draft bill that the Alliance and its members find 
troubling and we support the testimony of Councilmember Praisner on 
behalf of local government organizations on those issues.
           i. peg programming--the last redoubt of localism.
    The federal Cable Act authorizes local franchising authorities to 
require cable operators to set aside capacity on their systems for PEG 
use,1 and to require cable operators to provide, over and 
above the 5% cable franchise fee, funds for PEG capital equipment and 
facilities.2 The amount of PEG capacity that is set aside on 
a particular system, as well as the level of funding provided by the 
cable operator, is locally determined, based on each community's 
determination of its own particular cable-related community needs and 
interests.3
---------------------------------------------------------------------------
    \1\ 47 U.S.C.  531.
    \2\ 47 U.S.C.  542(g)(2)(C).
    \3\ See, 47 U.S.C. 546(a)(4)(B) and 546(c)(1)(d).
---------------------------------------------------------------------------
    The PEG provisions of the Cable Act are intended to provide all 
members of a community with access to the medium of television. Indeed, 
PEG is the only way that average citizens and community groups have 
assured access to communicate to their community via television. 
Particularly in this era of mass media consolidation, PEG access 
ensures that locally-produced programming, of interest to and tailored 
to the particular local needs of the community, has an outlet on 
television.
    PEG access has served that purpose exceedingly well. Among other 
things, PEG provides:

 The only nmediated coverage Congress Members receive in the home 
        district. A number of members of Congress use Public Access 
        channels to communicate directly with their constituents.
 Church Outreach--Religious programming represents 20-40% of 
        programming at most Public Access centers. For the shut-in and 
        infirm, this is often the only means by which they can 
        participate in local services.
 Coverage of local cultural activities, particularly in smaller 
        communities that do not receive commercial media attention. 
        Examples include coverage of local historical, art and music 
        events.
 The ability to maintain the local cultural identities of our towns, 
        cities and counties. Examples include coverage of local high 
        school football games, local parades and other civic events.
 Local Governmental Programming--Coverage of city/town/county council 
        meetings, and local police, fire, and public safety 
        programming.
 Local Education Programming--Cablecast of public school and local 
        college educational programming.
 Technical training and jobs. PEG operations employ more people of 
        color in management and technical positions than in all 
        commercial media industries combined. PEG centers also provide 
        vocational training in television camera and production work 
        for local high school and college students.
 News for military families--Army Newswatch is the most-syndicated 
        program on PEG channels, with carriage on over 300 PEG channels 
        nationwide.
    Let me provide you with some specific examples:
    The Kalamazoo Community Access Center (``CAC'') has provided PEG 
access programming for 25 years. CAC operates 5 PEG channels providing 
2,100 programming hours per month. For 16 years, CAC has provided 
``live'' multicamera coverage of the annual United States Tennis 
Association's Boys 16 and 18 Championships from the campus of Kalamazoo 
College. The coverage is dawntodusk for 11 days, and requires hundred 
of volunteer hours in challenging weather conditions. This coverage is 
made possible by the availability and use of a fiber institutional 
network that links the Kalamazoo College campus and the CAC master 
control facility. CAC volunteer Dave Williams helped produce the 
``Banned Books ReadOut'' program that featured a selection of wellknown 
local personalities reading selections from a number of popular books, 
including Ray Bradbury's Fahrenheit 451, Maya Angelou's I Know Why The 
Caged Bird Sings, and Mark Twain's classic Huckleberry Finn. The 
program was made possible with the cooperation of the ACLU--SW Michigan 
Chapter and the Kalamazoo Public Library.
    At the Community Television Network in Ann Arbor, Michigan, the 
public access center created a program in partnership with National 
Kidney Foundation focused on the risks of kidney disease among African 
American men and women. African Americans are seven times more likely 
to get kidney disease compared to white Americans. The award winning 
program has been cablecast on PEG channels throughout the state of 
Michigan.
    In Illinois, a fledgling statewide public affairs network called 
The Illinois Channel originates in part out of Rep Shimkus' District, 
bringing C-SPAN type of coverage of state government to nearly 1.3 
million Illinois cable homes. The entire distribution network of The 
Illinois Channel is due to the existence of PEG channels.
    During the 2004 election season, Chicago Access Network Television 
(``CAN TV'') ran 160 hours of local election coverage, including 
information on candidates for presidential, senatorial, congressional, 
and local judicial elections, as well as in-depth interviews by The 
Illinois Channel with state district candidates. CAN TV devotes its 
resources to local programming with an annual budget that wouldn't buy 
a single thirtysecond commercial during the Super Bowl. Those modest 
resources are put at risk by this legislation. In an earlier article on 
CAN TV's election coverage, the Chicago Tribune reported that, 
``Chicago's five access channels bring no small measure of serious 
politics, especially involving those large shut out heretofore from 
mainstream commercial media, including blacks, Hispanics, and, of 
course, Republicans.'' (We are talking about Chicago.)
    Media Bridges in Cincinnati and Hamilton County, Ohio, cablecasts 
more than 15,000 hours of local programming produced by and for greater 
Cincinnatians by organizations like the Contemporary Arts Center, the 
Lifecenter Organ Donor Network and Literacy Network of Greater 
Cincinnati and more than 80 area religious organizations. According to 
a 2003 study, the 96 cents per subscriber per month in PEG access 
support that provides the majority of Media Bridges' financial support 
is multiplied almost seven times to provide an economic impact in 
greater Cincinnati of more than $5.3 million per year. This draft bill 
would eliminate that support.
    In New Jersey, PEG stations are working with county governments to 
incorporate emergency public notification via the over 150 stations 
throughout the state. The system will allow communication from any 
emergency command location or mobile disaster unit to the communities 
effected via any specific town PEG station, a group of stations 
covering a specific area, or all the stations covering an entire 
county. This system will have the ability to interrupt programming 
instantly with text notices that include health hazard notifications, 
aid station locations, and evacuation instructions. The notices can 
also be removed and/or updated as needed with the same efficiency. This 
system will provide a vital and much needed service that will fill the 
communications gap that local governments need keep the public informed 
and safe in the event of any emergencies from a local level crisis to 
supporting national disaster organizations through the use of PEG 
stations. This capability will be lost under the draft bill as a result 
of the reduced PEG funding and the orphaning of institutional networks 
systems.
    Community Television of Knoxville, Tennessee (CTV), has served the 
residents of Knoxville and Knox County for 30 years. For only $24 per 
year, the typical volunteer community producer at CTV receives training 
and unlimited use of PEG equipment (including cameras, studios, and 
editing equipment) to produce and air their own television programs. 
There is no other means by which community residents can find such an 
inexpensive way to effectively reach 110,000 community households with 
information pertaining to local issues, local resources and matters of 
interest to them, from support for victims of Alzheimer's disease and 
their families, to foster care, law enforcement, and youth recreation.
    Every week, Cambridge (Massachusetts) Community Television produces 
50.5 hours of live programs on its BeLive set--shows that include Crime 
Time, produced by the Public Information Officer of the Cambridge 
Police Department, Bed Time Stories, Muslims Inside and Out, Local 
Heroes, and two smoking programs, one against, and one for smokers' 
rights. Even though Cambridge is a city of over 100,000 residents, it 
is in the shadow of the Boston media market, and the commercial 
television stations and daily newspapers consequently do not cover the 
local elections. As a result, Cambridge Community Television's election 
programming is the only place that residents can tune in to learn more 
about local candidates.
    In southern Oregon, Rogue Valley TV is the PEG access organization 
for four cities and three counties. Since 1999, the Medford Police 
Department has produced monthly the Medford Police Department's Rules 
of the Road, a one-hour live call-in program primarily on traffic and 
pedestrian laws. The police average 30 phone calls per show as Medford 
residents jam phone lines waiting to talk with their local police 
officers. Without use of institutional network fiber and equipment 
purchased with PEG funds, the program would never reach homes in 
Medford, Eagle Point and Jackson County, and the phones would be 
silent.
    Albuquerque, New Mexico's Sandia Prep School just sent 30 students 
through Quote . . . Unquote's public access television orientation as 
this top academic school begins its third year of ``Speak Out.'' 
Students produce the program and provide all technical work on the 
series that features high school debates, dance and music performances, 
including the orchestra. The student producer from an earlier year used 
his experience to win a scholarship to a top college. Sandia students 
are dependent on equipment purchased from a separate cable franchise 
PEG capital fund; their program is sent to subscribers through the 
cable system's fiber optic institutional network. Quote . . . Unquote 
training, facilitation and programming staff are funded from cable 
television franchise fees, which would be substantially reduced by this 
legislation.
    ii. the november 3 staff draft would substantially reduce, and 
             ultimately eliminate, funding for peg access.
    PEG access is only possible if there are adequate funds to support 
it. The overwhelming majority of PEG funding comes from two sources: 
(1) monetary and inkind support for PEG capital facilities and 
equipment from the cable operator over and above the 5% cable franchise 
fee that is required by the local franchise agreement; and (2) 
contribution by the local franchising authority of a portion of the 5% 
cable franchise fee to PEG.
    In Kalamazoo, for example, PEG funding comes from both of those 
sources: the Access Center receives 35 cents/month/subscriber for PEG 
support and, in addition, the communities contribute 40% of their 
franchise fees to the Access Center. In Cincinnati and Hamilton County, 
Ohio, the Access Center receives 96 cents/subscriber/month in PEG 
support from the cable operator as required by the local franchise 
agreement.
    The November 3 House Staff draft bill, however, would eliminate one 
of those sources of funds to support PEG, and substantially reduce the 
other.
A. The Loss of PEG Capital Support Obligations.
    Unlike the Cable Act, which allows local franchising authorities to 
require a cable operator to provide PEG access capital facilities and 
equipment funding over and above the 5% franchise fee, the draft bill 
would exempt broadband video service providers from such an 
obligation.4 Moreover, the draft bill's PEG provisions place 
no obligation on, or ability to require, broadband video service 
providers to fund PEG access production facilities and 
equipment.5 The result is clear: Unlike incumbent cable 
operators, broadband video service providers under the draft bill 
cannot be required to provide the local community with any monetary 
support for PEG beyond the 5% franchise fee. That would also mean that, 
over time, the incumbent cable operator would no longer provide such 
PEG support, as it would no doubt refuse to continue to incur a cost 
from which its broadband video service provider competition has been 
immunized. Alternatively, the incumbent cable operator would eventually 
transform itself into a broadband video service provider, thereby 
freeing itself directly from its PEG support obligations.
---------------------------------------------------------------------------
    \4\ Compare 47 U.S.C.  542(g)(2)(C) with Draft Bill,  2(a)(9) 
(PEG access grants not excluded from ``franchise fee'' definition).
    \5\ See Draft Bill,  304(b).
---------------------------------------------------------------------------
B. A Reduced Franchise Fee Revenue Base Would Reduce Local Franchising 
        Authority Financial Support for PEG.
    The draft bill, unlike the Cable Act,6 restricts the 
``gross revenue'' base for the 5% franchise fee to revenue ``collected 
from subscribers.'' 7 As a result, non-subscriber revenues, 
from sources such as advertising and home shopping channels, would be 
excluded from the franchise fee revenue base under the draft bill. That 
would represent anywhere from a 10% to 15% reduction in the franchise 
fees that local governments currently receive under the Cable Act. And 
non-subscriber revenues--especially advertising revenues--are one of 
the fastest growing revenue streams in the current cable franchise fee 
revenue base. In those communities, like Kalamazoo and many others 
elsewhere, where the local government contributes a portion of its 
franchise fee revenues to fund PEG access operations, the reduced 
franchise fees caused by the draft bill would result in a substantial 
reduction in the funds that PEG access centers currently receive from 
cable franchise fees.
---------------------------------------------------------------------------
    \6\ 47 U.S.C.  542(b).
    \7\ Draft Bill,  303(d)(3).
---------------------------------------------------------------------------
    The combined elimination of PEG grants and the substantial 
reduction of franchise fee revenue available for PEG use that would 
occur under the draft bill would result in a funding reduction for PEG 
access that would be nothing short of catastrophic for many, if not 
most, PEG access centers across the nation.
  iii. the november 3 staff draft would limit peg capacity to current 
  levels, thereby depriving communities of the ability to tailor peg 
       capacity to changing, and often growing, community needs.
    Under the Cable Act, the number of channels set aside for PEG use 
is determined individually by each local community based on its 
particular PEG needs and interests. Perhaps more importantly for the 
discussion here, the current Cable Act allows local communities, 
through the cable franchise renewal process, to reassess their PEG 
needs periodically, and to increase the channel capacity set aside for 
PEG where demand warrants.
    As you might expect, the number of PEG channels set aside varies 
widely from community to community. This is precisely the sort of local 
self-determination and flexibility that one would expect--and that 
should be cherished--if the localism that PEG programming embodies is 
to survive. The draft bill, however, would short-circuit this process. 
It would essentially cap PEG access capacity at current 
levels.8 That would mean that local communities would be 
locked into current PEG capacity limits--limits that were often set 
years ago when the incumbent cable operator's franchise was last 
renewed.
---------------------------------------------------------------------------
    \8\ Draft Bill,  304(b)(1)(A). It might be argued that  
304(b)(1)(A) allows for PEG capacity growth, since it requires the 
broadband video service provider to provide PEG capacity comparable to 
the incumbent cable operator, and the incumbent operator's PEG capacity 
obligations might be increased in subsequent cable franchise renewal 
proceedings. But that would not likely occur if the draft bill became 
law because: (1) the incumbent cable operator would probably no longer 
be willing to agree to increase PEG capacity without an effective 
franchise process assurance that the broadband video service provider 
has to match that increase; and (2) the incumbent operator would, over 
time, likely become a broadband video service provider itself and thus 
become immune from the Cable Act renewal process.
---------------------------------------------------------------------------
    But there is no reason to suppose that PEG capacity needs are 
static. In fact, those needs typically grow over time, as the local 
community's interest in PEG programming grows, and the volume of PEG 
programming grows.
    The draft bill's effective ceiling on PEG access capacity would 
have a particularly harsh effect on communities with older franchise 
agreements, many of which may currently have relatively few channels 
set aside for PEG. The draft bill would deprive these communities of 
the ability to increase PEG access capacity and thus forever sentence 
them to inadequate PEG capacity to meet their future needs.
                               conclusion
    Across the nation, PEG access centers put television in the hands 
of the people, not as passive consumers, but as speakers and 
information providers. As Chairman Upton observed back in 1999:
        ``The Community Access Center provides a diverse programming 
        schedule that can't be found anywhere else, reflecting a cross-
        section of society and offering an empowering media voice to 
        those who may otherwise not have a chance to be heard.''
    In its current form, the draft legislation threatens to silence 
these voices because it would undermine the continued financial 
viability of all PEG centers nationwide. We therefore ask that the 
draft be revised to ensure the continued viability of PEG access, the 
only truly genuine form of localism and diversity in the television 
medium. The Alliance looks forward to working with you in making the 
necessary changes to the legislation.
    Thank you for the opportunity to speak to you today, and I would be 
happy to answer any questions you may have.

    Mr. Upton. You bet. Thank you. Thank you for being here. 
Mr. Kimmelman, welcome back.

                   STATEMENT OF GENE KIMMELMAN

    Mr. Kimmelman. Thank you, Mr. Chairman, members of the 
subcommittee. On behalf of Consumers Union, the print and 
online publisher of Consumer Reports, we once again thank you 
for inviting us to discuss the staff draft.
    I would urge you to think about this legislative process as 
you go forward with an eye toward what is going on in the 
marketplace and what consumers are experiencing. We have a 
cable company in most communities; we have a telephone company 
in most communities; and we have the hope for more players 
coming in. And you will note that just last week, one of the 
major new consolidated players that reduced the number of cell 
phone providers we have, Sprint-Nextel, which was going to be a 
new broadband third choice for consumers, decided to cut a 20-
year contract with 4 major cable companies to offer its 
broadband services in conjunction with one of the two dominant 
players. What we see happening over and over again is that it 
is the two dominant players, the Telco and the cable company, 
who still reign supreme. And something is particularly wrong in 
the marketplace when, on order to get voice over the Internet 
competitively, you have to go SBC or Verizon and you have to 
buy their DSL service and their voice service, whether switched 
or VoIP, before you can pick a competitor. And something is 
also wrong in the marketplace when in order to get a high-speed 
Internet service over cable, you have to go to the cable 
company and use its high-speed service to pick another--if you 
can even pick another. And something is really wrong in the 
marketplace with the explosion of all the video programming out 
there when the consumer can't pick the channels he or she wants 
to get, has to take the package of channels offered by the 
cable company, or the satellite company, or the telephone 
company. Can't eliminate payment for channels the consumer 
finds distasteful and inappropriate because it is bundled by 
the dominant video provider.
    Now, the staff draft does a number of important positive 
things, but unfortunately it doesn't address these critical 
problems, and may create significant new problems just like 
these for the Internet by putting too much power in the hands 
of broadband video providers, whether they be a former cable 
company or former telephone company, to control what consumers 
get, how they get it, what applications, how they are packaged, 
what you pay for them, with inadequate public enforcement 
mechanisms.
    Now, clearly on the positive side of here, what you have 
done is enormously important in allowing communities to build 
their own broadband open networks. This addition to the 
marketplace would bring, we hope, expanded choices, greater 
diversity, and opportunities for minority-owned and controlled 
content, if cities choose to take advantage of it. And clearly 
it is critical that you are opening the door and speeding up 
the process for video competition from telephone companies. 
That clearly will benefit consumers if you address this problem 
of how programming is packaged. That requires further 
intervention, unfortunately, than what the staff draft 
currently proposes.
    But in opening the door to video competitions, so critical 
for consumers who see cable rates continue to go up almost 3 
times the rate of inflation, as Mr. Ellis pointed out, it is 
absolutely essential to make sure that the wonderful open 
attributes of the Internet are not closed off at the same time. 
And, unfortunately, some critical definitions, some critical 
matters where there are discrimination issues and issues of how 
services are offered, are not adequately defined in the draft, 
and are left to private negotiation rather than public 
obligation. We are concerned that you are effectively 
eliminating reasonable prices, terms and conditions, provisions 
from Title I and Title II of the Communications Act.
    And, finally, I would like to point out that when it comes 
to Federalizing consumer protections, I urge you to think about 
this really carefully. Imagine what happens when a consumer 
complains about a service they never requested, which you have 
covered under your consumer protection provisions. They 
complain about--do you really want them to have to go to the 
FCC to have to rely on an agency that I don't believe anyone on 
this committee has ever thought does its job very effectively, 
efficiently and certainly not in a timely fashion? Is that a 
meaningful way of resolving a complaint about something you 
didn't request? And then even worse, what if your bill is 
inaccurate or you think your bill is inaccurate? I am sure you 
have got many constituents who feel this way quite often. Under 
the staff draft, not only can they not go to their State 
regulators or local officials, but the FCC isn't even empowered 
to look at that issue. I think----
    Mr. Upton. Just to interrupt you. I will stop. I think we 
have written this so that they can go to the PUCs to do that, 
to enforce the Law.
    Mr. Kimmelman. The moment the company says we disagree with 
that, it is back at the FCC. There is nothing you can do. But 
on a bill that is inaccurate, it is not even covered by the 
provision. I mean, I would just hope----
    Mr. Upton. You can clarify that.
    Mr. Kimmelman. Okay. I would hope you would want to because 
as much as it is important to streamline the process here of 
new entry and new players, it is absolutely critical for 
consumers to have a place to go that is convenient and that 
will deal in a timely fashion with their concerns.
    In conclusion, Mr. Chairman, we think that there is much 
work that needs to be done on this legislation, but there are 
important issues that you are addressing. And we hope that you 
will continue to work with all outside players to try to craft 
legislation that both brings competition, brings us more video 
players, more choices in the marketplace, but does not undercut 
critical principles of Internet access. Thank you.
    [The prepared statement of Gene Kimmelman follows:]
Prepared Statement of Gene Kimmelman, Senior Director of Public Policy 
                     and Advocacy, Consumers Union
    Consumers Union 1 and Consumer Federation of America 
2 appreciate the opportunity to testify on the broadband 
policy discussion draft. We are grateful to Chairman Barton and members 
of this Subcommittee for their leadership on these important consumer 
issues.
---------------------------------------------------------------------------
    \1\ Consumers Union is a nonprofit membership organization 
chartered in 1936 under the laws of the state of New York to Provide 
consumers with information, education and counsel about good, services, 
health and personal finance, and to initiate and cooperate with 
individual and group efforts to maintain and enhance the quality of 
life for consumers. Consumers Union's income is solely derived from the 
sale of Consumer Reports, its other publications and from noncommercial 
contributions, grants and fees. In addition to reports on Consumers 
Union's own product testing, Consumer Reports with more than 5 million 
paid circulation, regularly, carries articles on health, product 
safety, marketplace economics and legislative, judicial and regulatory 
actions which affect consumer welfare. Consumers Union's publications 
carry no advertising and receive no commercial support.
    \2\ The Consumer Federation of America is the nation's largest 
consumer advocacy group, composed of over 280 state and local 
affiliates representing consumer, senior, citizen, low-income, labor, 
farm, public power an cooperative organizations, with more than 50 
million individual members.
---------------------------------------------------------------------------
    For decades, consumers have suffered under monopolistic cable 
pricing that has resulted in skyrocketing cable bills and fewer 
consumer choices. And despite the promise of more competition in 
wireless and wire line phone services, consumers have seen more 
consolidation and fewer marketplace choices. But the advent of 
broadband now offers tremendous opportunity to inject new and 
potentially vigorous competition into the telecommunications 
marketplace that has become increasingly concentrated over the past 
decade.
    We welcome the Committee's interest in fostering greater consumer 
choice by allowing communities to offer affordable broadband services 
to their residents. The draft provision prohibiting preemption of 
municipal broadband services helps ensure that communities do not face 
additional roadblocks to affordable broadband access for their 
residents.
    If communities build open broadband systems, consumers will no 
longer be held hostage to the dominant phone or cable provider--they 
should be able to get video, voice and Internet services from many 
sources. Broadband, whether offered by the municipality or other 
provider, can break the anticompetitive spiral by loosening the 
stranglehold that dominant telephone and cable monopolies have enjoyed 
for decades. But in order for that opportunity to be realized, 
broadband policies must facilitate the entrance of new or alternative 
market players that offer voice, video and data services widely 
available from cable, telephone companies or any other delivery system.
    However, given the enormous consolidation in wire line and wireless 
communications services, this draft fails to deliver the policies 
necessary to ensure that consumers will receive meaningful growth in 
price competition in what has become the most important 
telecommunications service--broadband connectivity. The draft's failure 
to confront the last mile bottlenecks created by the dominant 
providers' existing control over competition may in fact foreclose 
opportunities for future meaningful competition in broadband.
    Worse, the draft takes a step in the opposite direction, relieving 
incumbent monopolists of key obligations while giving them 
unprecedented ability to restrain broadband competition, and therefore 
phone and video competition, offered by new market entrants. 
Technological change must not result in the abandonment of fundamental 
values embraced over 70 years of telecommunications policy--values like 
nondiscrimination, participation in decision making, and protection of 
both new market players and consumers from abuse.
    This draft hands over unprecedented power to broadband providers to 
discriminate among potential competitors and prevent their own 
customers from freely accessing content on the Internet and to use 
applications and devices of their choice. As it purports to promote 
competition in voice, video and data services, it virtually ensures 
that the two dominant incumbents will compete at most with each other 
while squeezing out third party competitors. It preempts the ability of 
localities to require new video entrants to build out their services to 
all consumers without imposing any national requirements for true 
competition. It federalizes all decisions on consumer protection while 
unfairly limiting the types of standards the Federal Communications 
Commission is authorized to establish. It precludes enforcement of even 
those limited standards by the states and gives consumers the 
unsatisfactory remedy of a drawn-out federal complaint resolution 
process. Consumers will be left with no where to turn and no remedy for 
relief.
    In short, the American consumer is being asked to give up a great 
deal in exchange for another promise of competition at some distant 
point in the future. Consumers have had their pockets picked too many 
times to be fooled again. Twenty years of broken promises make us 
skeptical that the sacrifices being asked of the public by this 
discussion draft will ever be offset by competitively driven reductions 
in prices or improvements in service quality. History tells a different 
story: one of increasing concentration, skyrocketing cable bills, and 
bigger bundles of expensive services forced on consumers by both the 
cable and telephone industries.
    Our specific comments on the draft follow:
                 nondiscrimination & network neutrality
    The promise of broadband is its ability not only to provide 
consumers with unlimited access to diverse sources of information and 
online services, but also to offer competitive alternatives to dominant 
telephone and video services providers through voice and video over 
Internet. But that competition will be stifled if broadband Internet 
transmission service providers are allowed to effectively block 
consumer access to both content and competitive services that use the 
provider's service. Unfortunately, the discussion draft, in its current 
form, does not prevent that.
    Section 104 codifies the principle that broadband providers should 
operate their networks in a neutral manner but simultaneously provides 
extensive exceptions, inviting network operators to discriminate 
against content, applications or devices that they do not own or 
control. The draft opens a wide door to discrimination.
    The draft bill allows broadband Internet transmission service 
(BITS) providers to discriminate against content, devices and 
applications they do not own so long as they can justify such 
discrimination under the guise of network management. This loophole is 
expanded for broadband video services that integrate Internet 
capabilities or those who provide enhanced service quality by declaring 
that they ``may not unreasonably'' impair, interfere, restrict or limit 
applications or services, but offers no standard for what is 
``unreasonable'' and contemplates no rulemaking to do so. There is a 
significant danger that ``reasonable'' discrimination may be nothing 
more than a desire to maximize revenue by blocking competition. 
Processes to resolve discrimination complaints allow BITS providers to 
block content or restrict use of devices and applications as complaints 
are resolved. This foot-dragging strategy is the model that the 
industry used to strangle head-to-head competition in the past decade.
    Giving network operators the power to dictate services opens the 
door to the ``cablization'' of the Internet. Cable and telephone 
company giants are encouraged by this bill to bundle more services 
together in take-it-or-leave-it packages and to make it harder, not 
easier, for competing communications service providers and Internet 
applications developers or service providers to reach the public. Both 
cable and local telephone industries have a long history of using their 
market power to stifle competition and undermine consumer choice. In 
the past decade, the cable industry has inflated monthly cable bills by 
more than 60 percent 3 and forced consumers to pay twice for 
Internet service if they want an Internet service provider other than 
the cable owned entity. The result has been thousands of Internet 
service providers out of business.
---------------------------------------------------------------------------
    \3\ Bureau of Labor Statistics, Consumer Price Index (November 
2005). From 1996 until September 2005, CPI increased 28.7% while cable 
prices rose 63.8%, 2.3 times faster than inflation.
---------------------------------------------------------------------------
    Telephone companies have followed a similar path with respect to 
local competition. Dragging their feet on market opening, they made it 
virtually impossible for competing local exchange carriers to get into 
the market. Once the Bells were let back into long distance, they 
slammed the door on competition and bought up much of what remained of 
the competitive local exchange carrier industry. At the same time, they 
have tied their high-speed Internet service (DSL) to voice, much like 
the cable operators tied Internet service to their high-speed 
communications. This duopoly dribbles out bandwidth increasingly in 
bundles that are unaffordable for most Americans. As a result, over the 
past half decade, America has fallen from third to sixteenth in 
penetration of high speed Internet access 4 and what we call 
high speed is vastly slower than what the rest of the world does.
---------------------------------------------------------------------------
    \4\ Organization for Economic Co-operation and Development (OECD), 
OECD Broadband Statistics, December 2004. Available at http://
www.oecd.org/document/60/0,2340,en_2649_34225_2496764_1_1_1_1,00.html ; 
International Telecommunications Union, Broadband Statistics, April 13, 
2005. Available at http://www.itu.int/osg/spu/newslog/
ITUs+New+Broadband+Statistics+
For+1+January+2005.aspx
---------------------------------------------------------------------------
    Giving the duopoly more power to control the consumer and undermine 
competition will not solve the problem, it will make it worse and it 
will have the added cost of further undermining innovation in broadband 
services. Learning a lesson from the cable operators, who have been 
free to close their network for years, the CEO of SBC, the nation's 
largest telephone company, has already declared his intention to use 
the new-found freedom to discriminate against and charge fees of 
Internet applications and service providers.5 By imposing 
limits on download speeds and declaring certain applications 
unacceptable, the cable operators sent a strong signal that they would 
control the services that flowed through the cable wires. Innovators 
abandoned the space and innovation moved abroad. With the telephone 
companies now poised to pursue the same anticompetitive, anti-
innovation strategy, a long shadow has been cast over the Internet 
applications market in America.
---------------------------------------------------------------------------
    \5\ ``At SBC, It's All About `Scale and Scope,' '' Business Week, 
November 7, 2005, http://www.businessweek.com/magazine/content/05--45/
b3958092.htm
---------------------------------------------------------------------------
    The importance of ensuring nondiscrimination in Internet access and 
traffic cannot be underestimated. It's important to understand that the 
Internet only grew and thrived because of two mandates of openness. 
First, the Internet protocols were developed as open protocols under 
government direction. The agencies that operated the Internet required 
the interconnecting networks to adopt and abide by these open 
protocols. Second, the underlying transmission medium, the telephone 
network, was required by law and rule to be operated in a 
nondiscriminatory manner under sections 201 and 202 of the 1934 
Communications Act 6, which make it unlawful for a provider 
to impose unjust and unreasonable rates, terms and conditions on other 
providers. This draft bill effectively repeals those provisions by 
making them inapplicable to BITS and BITS providers and yet provides 
the Commission with no authority to promulgate rules or standards for 
non-discrimination on networks. Moreover, the minimal interconnection 
obligations for BITS and BITS providers included in the bill are not 
even subject to a standard that requires interconnection based on a 
public interest standard. Instead, interconnection agreements are left 
solely to the discretion of the dominant network provider and the 
unaffiliated provider seeking interconnection, with no standards for 
what they must include and what is prohibited.
---------------------------------------------------------------------------
    \6\ 47 U.S.C. 201-202.
---------------------------------------------------------------------------
    Strong, enforceable nondiscrimination provisions are essential to 
continued growth and competition in not just broadband service, but 
also for continued innovation in Internet content, services, and 
applications. The draft bill not only fails to provide standards for 
what impairment, interference or blocking is considered 
``unreasonable,'' it provides no meaningful remedy for those 
unaffiliated providers whose applications, services or content is 
restricted by a BITS provider. And it places the burden of proving that 
interference is ``unreasonable'' squarely upon those whose rights are 
violated--businesses with far less power than the dominant incumbent 
and consumers, who are entirely powerless under the bill's complaint 
procedure.
    Though the draft gives the Federal Communications Commission the 
authority to order continuation of service while a discrimination 
complaint is being resolved, the authority is discretionary. More 
likely, the dominant incumbent will block the applications, content or 
device provider during the months-long complaint investigation and 
resolution process, undermining the viability of the competitive 
business. Because of the history of network discrimination, the draft 
should place the burden of proving that blocking, impairment or 
interference content, services or applications is reasonable by 
requiring the BITS provider to bring a complaint to the Commission and 
mandate service continuation until permission to impair is provided. 
Until that case is effectively made, the services, content and 
applications should not be interfered with.
    Additionally, considering that broadband networks will become the 
major means of communications in this country, the Committee should 
retain a strong public interest standard for interconnection agreements 
and authority for the Commission to mandate interconnection when it is 
in the public interest.
                          national franchising
    While we applaud the goal of expanding competition to cable 
monopolies, if Congress establishes a national franchise for 
competitive video services in order to foster more competition, it must 
also provide for strong, uniform, minimum national standards that meet 
the needs of communities. In particular, this must include provisions 
to meet community programming needs, ensure build-out and prevent 
redlining--all negotiating authorities previously provided to 
localities but effectively eliminated by the draft. If communities are 
forced to forfeit their rights to ensure fair treatment of and service 
to their residents, this bill must also establish adequate national 
standards in place of those local rights. Without these requirements, 
the promise of more competition will be just another empty one.
    In the absence of explicit requirements that the Bell-entrants 
build out and make their services available to all consumers in a local 
franchise area, we fear competitive video services will come only to 
``high-value'' consumers--those capable of paying for the full bundle 
of services that the Bells wish to offer. The favoring of upscale 
consumers to the exclusion of low-income, minority and ethnic groups in 
the provision of consumer services has long been a concern in the 
communications industry and is of growing concern in advanced 
telecommunications services given the importance of broadband access to 
functioning in today's society. The anti-redlining provision (Section 
304(c)) is a symbolic step in the right direction to ensure that low-
income communities--those most in need of price relief that broadband 
competition can bring--are not excluded by broadband video service 
providers.
    Unfortunately, by providing sole enforcement power to the 
Commission and preempting local and state authorities in this area, we 
have strong concerns that the prohibition will be largely meaningless. 
The Commission will be charged with monitoring compliance in 
potentially thousands of communities, with no new resources dedicated 
to that enforcement and no adequate date on which to base its 
determinations. Moreover, the enforcement provision lacks specificity 
both as to how the Commission will monitor compliance by broadband 
video service providers and how quickly it will take action to remedy 
nonperformance by providers. We urge your consideration of shared or 
sequential monitoring and enforcement of anti-redlining provisions by 
the Commission, the states and localities. And it is unclear whether 
discrimination based on race, ethnicity or other exclusions based on a 
``lack of projected demand for service'' would be allowed under the 
draft legislation.
    However, even enforceable anti-redlining provisions may be 
incapable of ensuring service to low-income populations so long as the 
burden lies with authorities to prove that income is the sole reason 
that service has been withheld as provided for in the draft. The 
combination of the lack of build-out requirements for new video service 
providers, together with relatively weak anti-redlining enforcement and 
the absence of meaningful local franchise negotiating authority, will 
prevent communities from taking action to ensure that all of their 
residents enjoy the benefits of competition.
    If legislation is to forfeit local franchising authority rights, it 
should also establish national mandatory minimum build-out requirements 
for new market entrants in the local franchise area in which they 
intend to provide service. If timely build-out is not required, then 
the Committee should require new entrants to provide financial 
resources to local communities or states for use in fostering 
alternative means of ensuring broadband competition and service to the 
entire community rather than to high-value customers alone. Those 
resources could be used to establish community broadband networks, 
competitive commercial services to areas underserved by the new 
entrant, or other means of assistance to help low-income consumers 
access advanced telecommunications services at affordable prices. 
Though Section 409 respects the rights of communities to build their 
own networks, it eliminates only one barrier--preemption. It provides 
no resources to assure municipalities can establish these networks. 
This is particularly a problem for communities with large low-income 
populations.
 application of video regulations to broadband video service providers
    Although the draft appears to apply current pro-competitive video 
rules (e.g. access to programming, ownership limits, must-carry) to new 
broadband video service providers, it opens the door to eliminating 
important statutory and regulatory protections within four years 
without a demonstration that such rules no longer serve the public 
interest. By allowing the few requirements Congress imposed on cable 
monopolies to promote competition--which enabled the satellite industry 
to grow and broadcasters to deliver quality local television 
programming--to expire without a thorough demonstration that all public 
benefits derived from these rules can clearly be attained through 
market forces, the draft would undermine some of the most important 
avenues for achieving diverse and competitive sources of television 
news and information. There is simply no reason to let the Commission 
eliminate these important pillars of public safety without Congress 
first initiating such modifications through targeted legislation.
                          consumer protection
    The bill's preemption of state regulation over BITS, VOIP, and 
broadband video services is a significant concern. States are 
frequently the first line of defense for consumers in resolving 
complaints about fraud, inadequate service, pricing and other anti-
consumer behavior. Instead the bill requires the Commission to 
establish national consumer protection standards for these services. As 
unsettling as federal preemption of all state regulation or enforcement 
is, equally troubling is the omission in this most recent draft of 
several directives for Commission standards included in earlier 
iterations of this legislation. Omitted provisions include limitations 
on early termination fees, requirements for customer service standards 
and the maintenance of consumer complaint records. If the Commission is 
allowed to preempt state regulation and enforcement, it must be 
required to issue comprehensive standards that fully protect consumers 
rather than be limited to the minimal mandates in the bill.
    In addition, because the draft allows telecommunications companies 
to redefine themselves as BITS, BITS providers, or broadband video 
service providers, they are able to skirt existing state and local 
consumer protection standards for traditional services.
    By preempting states from developing their own consumer protection 
standards and then simultaneously preventing their final enforcement of 
national standards, the bill significantly weakens consumer 
protections. States will have only the ability to issue compliance 
orders when providers violate Commission standards. They can take no 
enforcement action of their own, raising serious concerns about the 
timeliness and resolution of consumer protection violations given 
Commission resources. And if a consumer complaint does not clearly fall 
under a national standard, consumers will be forced to wait for 
subsequent Commission action in order to resolve their problems.
    Finally, the complaint process envisioned by the draft threatens to 
leave consumers, municipalities and states without resolution of 
concerns for many months as the Commission forwards the complaint to 
the offending party, awaits an answer, investigates the complaint and 
then mediates or arbitrates the issue. At a minimum, any legislation 
should provide states with the ability to enforce federal standards and 
allow states the flexibility to protect consumers against new forms of 
abuse while awaiting Commission action to formulate final rules.
         rights of municipalities to provide broadband networks
    We offer our strong and unqualified support for Section 409, which 
prohibits state preemption of municipal broadband networks--a critical 
component of any legislative package that seeks to increase consumer 
access to advanced telecommunications services. The provision is 
essential to any legislation that seeks to foster competition in data, 
video and voice services, and expand affordable high-speed Internet 
access to all Americans.
    Hundreds of communities have responded to the lack of affordable 
broadband access by creating their own networks through public-private 
partnerships, offering new opportunities for entrepreneurs. Community 
broadband networks offer an important option for communities in which 
broadband services reach only certain areas or are offered at prices 
out of reach for many consumers. Equally important, the mere 
possibility that a community may develop a broadband network helps 
discipline the marketplace.
    Efforts to prohibit these community networks stifle competition 
across a range of telecommunications services, stall local economic 
development efforts, and foreclose new educational opportunities. 
Section 409 of the draft ensures that communities that want to foster 
broadband access are not precluded from doing so.
                                summary
    We applaud the Committee's efforts to modernize regulation to 
foster broadband competition, technological innovation and adoption of 
high-speed Internet. Unfortunately, the approach of this draft heads in 
exactly the opposite direction: it will hamper competition, stifle 
innovation, and do little to promote ubiquitous affordable access to 
advanced services. We look forward to working with you to address these 
issues as the Committee continues its work.

    Mr. Upton. Thank you. Mr. Wiginton?

                  STATEMENT OF JOEL K. WIGINTON

    Mr. Wiginton. Thank you, Chairman Upton, for inviting us to 
testify. My name is Joel Wiginton. I am Vice President and 
Senior Counsel at Sony Electronics for Government Affairs. It 
is about almost 6 hours after this hearing started, so rather 
than read my testimony verbatim, I will just give you the 5 top 
highlights of my testimony. We are a leading consumer 
electronics manufacturer, including the manufacture of 
televisions, from soup to nuts, in Pennsylvania, and personal 
computers in San Diego. There are five main points.
    My first is that our industry, and consumers in general, 
will substantially benefit from a truly competitive video 
service market. In particular, we are encouraged by the 
competition potentially offered by new entrants such as the 
ILECs, and we want to applaud the committee for your efforts to 
realize this competition.
    Second, and perhaps the most important for our industry and 
consumer electronics consumers, is that we need to truly 
realize right of attachment as envisioned by Section 629 of the 
Telecommunications Act. We were pleased that the draft bill 
extends the principles of 629 to broadband video service 
providers, but what we really need is an explicit right to 
attach. Absent an explicit right, there will be little 
competition for consumer electronics devices that attach to the 
networks, and consumers will have little choices as well 
because service providers can use their monopoly power over 
that network to control the devices that attach to that 
network, and how consumers can use those devices.
    Consumer choice will suffer for three main reasons. One, 
there will be little competition for consumer prices for 
devices that attach to the network. Two, there will be little 
competition for features and functions for devices that attach 
to the network. And, three, there will be little innovation and 
little incentive for consumer electronics device manufacturers 
to create new consumer-friendly products that attach to the 
network.
    Our third point, we are quite pleased that the draft bill 
applies the net neutrality principles to the broadband Internet 
access services. We want to point out though that if these 
principles are violated, we want to ensure that there is 
meaningful enforcement of these principles by the Federal 
Communications Commission.
    Fourth, we do have some concerns with the mandatory 4-year 
sunset review provision of the bill. As Mr. Stearns said in his 
opening statement, what we want to do with this bill is create 
regulatory certainty. And while this provision will ensure 
employment for myself--lawyers and lobbyists like myself in 
perpetuity--it really does do the exact opposite for people in 
my industry. It creates a systemic intolerable uncertainty for 
the consumer electronic industry.
    And, finally, while we very much support the spirit of the 
bill and its attempt to create meaningful access for persons 
with disabilities to broadband services, we do have some 
concerns with the precise language of the bill. That said, we 
think that a compromise is easily obtainable, and we want to 
work with the committee and members of the disability community 
to create a provision that effectively creates access for 
persons with disability.
    Thank you very much, and we look forward to any questions.
    [The prepared statement of Joel K. Wiginton follows:]
   Prepared Statement of Joel K. Wiginton, Vice President and Senior 
                     Counsel, Sony Electronics Inc
                              introduction
    Chairman Upton and Ranking Member Markey, my name is Joel Wiginton, 
and I am Vice President and Senior Counsel for Government Affairs at 
Sony Electronics Inc. We are a leading manufacturer of consumer 
electronics devices, including televisions, DVD players, and personal 
computers. My company appreciates the opportunity to express its views 
on the staff discussion draft creating a statutory framework for 
Internet protocol and broadband services.
    Over the past several years, consumers nationwide have benefited 
from a revolution in consumer technology--a revolution that has allowed 
for an ever-increasing array of products to interconnect and access the 
power of IP-enabled services through the Internet. Consumers enjoy 
``on-demand'' access to all types of content using a vast array of 
consumer electronics devices. This revolution has fueled the U.S. 
economy and helped to maintain our country's leadership in innovation 
and entrepreneurship.
    Policymakers have long recognized the value of unfettered access to 
communication services. FCC regulation in the 1970s and 1980s fostered 
the growth of the Internet by prohibiting telephone companies from 
preventing the offering of ``enhanced services'' and allowing consumers 
to attach their own devices to the network. Further, Congress 
recognized the importance of consumer choice when it enacted, in 1992, 
Section 624A of the Communications Act mandating compatibility between 
consumer electronics and cable television systems and, in 1996, Section 
629 mandating the commercial availability of navigation devices 
connecting to multichannel video programming systems.
 promoting market-based competition and preserving the marketplace for 
                           edge technologies
    As an industry, we are excited about the potential for new, 
competing broadband services, including new video programming services. 
We believe that these new services should be able to flourish and not 
be saddled with burdensome and inappropriate legacy regulations. At the 
same, we believe that the success of broadband services depends on 
preserving the existing paradigm between consumer electronics 
manufacturers, service providers, network operators, content 
developers, and the government. This paradigm includes a commitment to 
open and unfettered consumer access to content, services and 
applications, and protecting consumers' ability to connect devices of 
their choice.
    High-speed broadband networks offer a platform for innovation that 
will thrive if application developers, device manufacturers, and 
network providers are free to differentiate their offerings and invest 
in new technologies without restrictions imposed by other industry 
players. We believe, therefore, that innovation will flourish only if 
device manufacturers have certainty that their products will be able to 
connect to IP networks and broadband services.
    If this freedom is not preserved in the broadband world, then 
network service providers will be able to dictate CE product design and 
functionality and to favor equipment of their own design and making 
over equipment provided by unaffiliated parties in the competitive 
marketplace. Using proprietary standards and restrictive licensing 
terms, service providers will be able to control the consumer 
experience, determining what devices consumers can use and how they use 
them. If service providers exercise this ability, the retail 
marketplace for ``edge network'' technologies like TiVo and portable 
video players, and the incentive to create new technologies, will no 
longer exist.
    Although we are hopeful that detailed regulations will not be as 
necessary with respect to emerging technologies as has been the case in 
the past (for example, with cable television), we believe that it is 
essential for Congress to direct and empower the FCC to ensure that 
consumer devices that can attach to broadband services will become 
commercially available. Consumers ultimately will benefit from the 
resulting array of choices available to them.
  enforcement mechanisms for ``net neutrality'' principles should be 
                      included in the legislation.
    We also would like to express our continued support for applying 
``net neutrality'' principles to broadband Internet access services. 
Section 104 in the draft bill applies these principles to such 
services. However, we believe that to ensure adherence to these 
principles, swift and appropriate action must be taken if they are 
violated. Additionally, we hope that service providers do not take 
unjust advantage of the exemptions in Section 104 to avoid complying 
with the principles.
    ensuring the commercial availability of devices that attach to 
                        broadband video services
    As discussed in the introduction, in 1996 Congress recognized the 
importance of consumer choice when it enacted Section 629 mandating the 
commercial availability of navigation devices connecting to 
multichannel video programming systems. We are pleased that the current 
draft bill directs the Federal Communications Commission to develop 
comparable regulations to apply to broadband video services providers.
    As the Commission develops these regulations, we believe that it is 
vital for such regulations to include an explicit ``right to attach'' 
competitive devices. The language set forth in Section 624A and Section 
629 does not include a clear right to attach. We ask, therefore, that 
the FCC be directed to include in its regulations an explicit right to 
attach commercially available devices to broadband video services so 
long as they do not harm the network or enable theft of service.
    Further, licenses for these technologies that allow the attachment 
of devices to broadband video services should not impose unrelated or 
unnecessary burdens on licensees, such as prohibiting designing the 
same device to attach to a separate broadband Internet service if the 
consumer has subscribed to such a separate service. We respectfully 
request the addition of amendatory language prohibiting broadband video 
service providers from imposing such limitations in their licenses.
    In addition, to ensure that the current ``two-way plug and play'' 
negotiations among cable providers and CE manufacturers are not stalled 
or undermined, we ask that language be added to the bill stating that 
until the Commission enacts new regulations, the current regulations 
implementing Sections 624A and 629 for cable operators shall continue 
to apply to covered multichannel video providers (cable) even after 
they qualify to be treated as broadband video service providers.
                  access to persons with disabilities
    The consumer electronics industry supports the goal of ensuring 
that persons with disabilities have access to products that attach to 
broadband services. However, we believe that the current draft bill, 
instead of working toward that goal, will work against it.
    The draft bill widens the scope of existing accessibility laws by 
including any and all devices used to access broadband Internet, voice 
and video service. It also creates a new undue burden standard that 
would require every manufacturer, on a case by case and potentially a 
product by product basis, to prove an undue burden. The uncertainty, 
compliance, and potential litigation costs would greatly impact 
manufacturers' ability to develop new, innovative devices that attach 
to broadband services.
    Current telecommunications law (Section 255) stipulates that 
manufacturers must provide products that are ``accessible to and 
useable by persons with disabilities, where readily achievable.'' The 
``readily achievable'' standard is defined as ``easily accomplishable 
and able to be carried out without much difficulty or expense.'' The 
current committee draft legislation defines an ``undue burden'' as 
meaning ``significant difficulty or expense.'' Thus, although the 
factors used to evaluate whether a feature or function is ``readily 
achievable'' or an ``undue burden'' are similar, the analysis could 
result in a radically different level of obligation for manufacturers.
    This difference could be critical for the ability of manufacturers 
to provide products with a variety of different features and functions 
that meet the needs of different markets. Under current law, 
manufacturers of telecommunications consumer products have been able to 
provide products with bare-bones capabilities at low cost and other 
products with enhanced capabilities at a fair market price. CEA is 
concerned that the change to an ``undue burden'' standard would result 
in a regulatory environment that would require every product be 
equipped with any feature that a single high-end product might be able 
to employ. The unfortunate result would be that manufacturers could 
become fearful to innovate in accessibility features, and hold back 
innovations that would otherwise have benefited consumers with 
disabilities.
    We are committed to working on compromise legislative language that 
would address the needs of the disability community, while not 
unreasonably impacting manufacturers and harming the overall economy.
                               conclusion
    Sony, and indeed CE manufacturers generally, support bringing true 
competition to the market for video services as soon as possible. We 
particularly support the efforts of new facilities-based entrants like 
the ILECs. Marketplace competition for video services will bring 
consumers lower prices and allow manufacturers to develop new and 
innovative products for consumers to access these services.
    Again, thank you for the opportunity to address the Committee on 
these important matters. We look forward to continued cooperation with 
the Committee and other interested parties.

    Mr. Upton. Thank you very much. Mr. Wilson?

                   STATEMENT OF DELBERT WILSON

    Mr. Wilson. Good afternoon, and thank you for inviting me 
to testify before you today. I am the general manager of 
Industry Telephone Company, which is headquartered in Industry, 
Texas. Our service area encompasses 226 square miles. We have 
three telephone exchanges providing service to approximately 
2,352 access lines. That is a density of only 10.3 subscribers 
per square mile. In addition to local service, Industry 
Telephone Company also provides Internet and inter-exchange 
services. Through its extensive infrastructure investment, 
Industry Telephone Company is a key driver to the local economy 
and rural development throughout its service area.
    Americans today uniformly rely on communications 
infrastructure and services to satisfy their commerce, security 
and entertainment. Moving forward, these needs will be met via 
a combination of two-way voice, video and data options. 
Consequently, deploying advanced infrastructure that is fully 
capable of offering such services should become the hallmark of 
our national communications policy. Unfortunately, as currently 
crafted, we are not convinced the draft legislation that is the 
subject of today's hearing would effectively establish such a 
foundation. Rather than setting a stage that would yield a 
ubiquitous broadband capable network the President and so many 
others of us seek, we fear the structural approach to this 
draft emphasizes regulatory silos that are not fully in sync 
with the convergence taking place in the industry. But more 
importantly, we particularly fear the approach could ultimately 
undermine the Nation's long-standing commitment to universal 
service. Without a strong commitment to this policy and the 
mechanisms necessary to carry it out, it is possible the 
dramatic vision this draft hopes to evoke may never 
materialize.
    A recent example of the importance of maintaining a strong 
universal service policy is demonstrated by the recent 
experience of ATCA member Cameron Communications in Sulphur, 
Louisiana. All 11 of Cameron's exchanges were devastated by 
Hurricane Rita. In the aftermath of that disaster, Cameron's 
challenges are significant, yet thanks to the Universal Service 
support, they are not insurmountable. While Universal Service 
support helped to build a pre-hurricane Cameron system, it has 
taken on an even more important role in the post-devastation 
period. With nearly all of its business and residential revenue 
base temporarily walked-out, the Universal Service support it 
receives is sustaining the system during this time of extreme 
need. By the way, Cameron is home to the Nation's Strategic 
Petroleum Reserve, which is of grave importance to all 
Americans.
    We are particularly concerned that the draft unnecessarily 
ignores that the communications industry is converging into an 
industry where carriers will be offering bundled voice, video 
and data services. What is needed is a broad definition of 
communications services that is not technology specific. A 
regulatory regime is necessary that regulates like services in 
a like manner regardless of the technology used. This regime 
must account for the high-cost networks and protect the 
integrity of the infrastructure that all of these providers 
equally rely upon to offer their services. This is the only way 
to preclude the sort of arbitrage that has already been allowed 
to occur under today's regulatory classification scheme, and 
that would surely continue on the approach envisioned by this 
draft.
    We are also concerned with the draft's interconnection 
provisions. While some of the earlier draft's more troubling 
aspects in this regard have been eliminated, we continue to 
believe more clarity is called for. The rural industry has 
always been in a difficult position when it comes to 
negotiating such matters, because, frankly, there is little 
incentive for others to come to the bargaining table with a 
small rural carrier.
    In addition, if the regulatory silo approach of the draft 
is preserved, we believe the interconnection and the reciprocal 
compensation arrangements discussed above should be clarified 
to apply to all titles of the Act. If regulatory equity among 
industry segments is truly the committee's objective, then this 
is a must.
    The draft in question today is complex and requires careful 
review. We intend to continue our scrutiny of its details, and 
we will certainly be happy to provide the committee with 
additional viewpoints as they emerge. In the meantime, it is 
important that the committee is fully aware of the rural 
sector's thoughts regarding any rewrite of our communications 
statutes. These details are outlined in my written statement.
    In terms of a broader rewrite of the Communications Act, we 
would implore the committee to remain cognizant of these 
specific areas that are so critical to rural carriers and the 
consumers they serve. If you are able to do that, you will have 
successfully ensured the creation of an environment that will 
sustain the Nation's commitment to ensuring all Americans with 
access to comparable, affordable communications services now 
and in the future. Thank you, Mr. Chairman.
    [The prepared statement of Delbert Wilson follows:]
    Prepared Statement of Delbert Wilson, General Manager, Industry 
Telephone Company on behalf of Industry Telephone Company and National 
               Telecommunications Cooperative Association
    Good morning! ITC is a company headquartered in industry, texas. 
Our service area encompasses 226 square miles. ITC has 3 telephone 
exchanges providing service to approximately 2,352 access lines. That 
is a density of only 10.3 subscribers per square mile. In addition to 
local service itc also provides internet and interexchange services. 
Through its extensive infrastructure investments, itc is a key driver 
of the local economy and rural development throughout its service area.
    ITC is representative of the nation's rural incumbent local 
exchange carriers. The good things we stand for and do make rural 
communities a better place in which to live and work. And make no 
mistake about it, our efforts contribuite directly to making the nation 
as a whole stronger and more secure. That is why I am honored to be 
appearing today on behalf of the hundreds of similarly situated rural 
carriers represented by the national telecommunications cooperative 
association--and more importantly, on behalf of their several thousand 
employees and several million subscribers.
    Throughout the debate surrounding the communications act rewrite, 
the initiative's most ardent advocates have repeatedly cited 
deregulation and competition as the keys to maintaining america's 
communications preeminence. Their theme revolves around the ideas that: 
``absolute competition and deregulation are always in the public 
interest; the communications era can only evolve to the next level with 
a hands-off policymaking aprroach; and the universal service oriented 
foundations of our past must be abandoned in favor of preferential 
treatment for specific emerging technologies and concepts.''
    The nation's rural carriers do not agree with this premise. The 
flaw with all these theories is that neither alone nor in tandem will 
any of them produce the results their advocates so desperately seek. In 
fact they will not even be capable of maintaining the status quo. And 
in the aftermath of recent natural disasters as well as the subversive 
threats our nation faces today, these communications can mean the 
difference between life and death.
    How many of you are aware of the critical role rural communications 
systems play in the aftermath of these types of events? As we speak, 
one such NTCA member continues its scramble to rebuild its system in 
the aftermath of huricanes Katrina and Rita that hit the Louisianna and 
Texas coasts. Cameron communnications in Sulpher, Louisianna, 
represents a critical economic and security link in Sulphur, in Cameron 
Parish, in Louisanna, and yes even in the United States.
    Cameron's service territory covers the states largest parish from a 
geographic perspective but perhaps it's smallest from a demographic 
perspective. Thankfully for all Americans, Cameron, like all NTCA 
members, views their mission as one based in the moral obligation of 
placing service ahead of profits. This is a particularly critical point 
considering the challenges Cameron faces today. This small rural system 
has been tasked with bringing communications service to the nation's 
strategic petroleum reserve which is located within its territory. In 
addition, there are major liquified natural gas facilities and a host 
of other petroleum related businesses in Cameron's territory that are 
relying on them to provide crucial services. If that were not enough, 
Cameron is also responsible for providing services to the National 
Guard, the Federal Emergency Management Agency, the Red Cross and other 
releif organizations currently operating in the area.
    Cameron's challenges are significant. Yet thanks to universal 
service support, they are not insurmountable. While universal service 
support helped to build the pre-hurricane cameron system, it has taken 
on an even more important role in the post-devestation period. With 
nearly all its business and residential revenue base temporarily wiped 
out, the universal service support it receives is sustaining this 
system during this time of extreme need.
    But that is just one example of rural carriers being prepared, as 
well as responding to natonal needs in the aftermath of significant 
events. How many of you are aware that it was a small rural system in 
the central plains that the Federal Government turned to for help in 
the immediate aftermath of the events of September 11, 2001. As efforts 
were launched to position the Vice President in a secure location, NTCA 
member venture communications, based in Highmore South Dakota was 
called to help with the effort. Again, because they were prepared, they 
were able to quickly establish secure communications in a remote 
location that the security intersts of that time mandated. And again, 
they were largely able to do this due to our national commitment to 
universal service.
    My point is there are more critical policy footings than 
compettition and deregulation that must remain in place to ensure the 
existence of a robust nationwide ubiquitous communications network--a 
network capable of supporting advanced services and responding to our 
nation's economic and security needs. Full cost recovery, fair access 
and interconnection are critical to a strong and useful communications 
foundation. Without them, there will be no network, be it wireline, 
wireless, or some other medium, to provide consumers with access to IP-
enabled or broadband oriented services.
    With regard to cost recovery, there are primarily two issues to 
keep in mind--universal service, and intercarrier compensation. These 
are not industry regulations as so many would like us to believe. They 
are industry responsibilities. In general, the industry as a whole 
believes that the way in which funds are collected and distributed for 
universal service and intercarrier compensation must be changed to 
ensure our network continues to thrive. The solutions for both are 
fairly simple ones.
    For universal service, we must refrain from ever linking its 
support mechanisms to general revenues, as its current industry funded 
approach is well proven. In additon, the base of contributors should be 
expanded and its distribution should be cost based to ensure 
accountability and credibility. This is contrary to the current rules 
where competitive providers receive suport based on the incumbents 
costs, regardless of their true cost of service.
    With regard to intercarrier compensation if any service provider 
uses another provider's network that service provider must compensate 
the other provider for the use of their facilities--at an appropriate 
rate. This notion is not complex; it is simply ensuring that all 
players stand up to their responsibilities of having the opportunity to 
partake in our capitalistic marketplace.
    Many call intercarrier compensation or access charges an implicit 
subsidy. I call it a legitimate operating cost for a telecommunications 
provider. We have invested tens of millions of dollars to serve rural 
communities. If a carrier would rather come and build their own network 
instead of using ours for a nominal fee, they are welcome to do so. As 
an internet provider myself, I compensate the owner of the Internet 
backbone that I must utilize to offer internet services to my 
customers. I view this as a legitimate cost for providing internet 
services to our customers. I recognize and accept that without use of 
their network I could not provide these services for my customers. I am 
therefore fortunate that the network resources are available to help me 
in providing my customers with the full array of advanced services that 
are available today.
    Tell me, why should a new service provider be able to access this 
network for free? Much of this debate seems to be focused on whether 
new IP-enabled service providers should pay access charges. To those of 
us that toiled to finance the deployment of infrastructure the question 
is: why should they not? I understand that we don't want to bog down 
new entrants with unnecessary regulations, but allowing them to skirt 
industry responsibilities is simply wrong. If a new provider's business 
plan can't accommodate playing by the rules and upholding industry 
responsibilities, then they probably shouldn't be playing. After the 
1996 Telecom Act, we saw a large influx of new telecom entrants. 
Unfortunately, many did not have sound business plans and were soon out 
of business or in bankruptcy thus, hampering investment in the 
telecommunications industry as a whole. We don't want to recreate the 
boom/bust scenario of that period by artificially incentivizing unsound 
businesses that cannot operate without benefitting from regulatory 
arbitrage.
    Americans today uniformly rely on communications infrastructure and 
services to satisfy their commerce, safety, security, entertainment, 
and leisure needs. Moving forward, these needs will be met via a 
combination of 2-way voice, video, and data options. Consequently, 
deploying advanced infrastructure that is fully capable of offering 
such services should become the hallmark of our national communications 
policy.
    Unfortunatley, as currently crafted, we are not convinced the draft 
legislation that is the subject of today's hearing would effectively 
establish such a foundation. Rather than setting a stage that would 
yield the ubiquitous broadband capable network the president and so 
many others of us seek, we fear the structural approach of this draft 
emphasizes regulatory silos that are not fully in sync with the 
convergence taking place in the industry. But more importantly, we 
particularly fear this structural approach, whether by design or 
accident, could ultimately undermine the nation's long-standing 
commitment to universal service. Without a strong commitment to this 
policy, and the mechanisms necessary to carry it out, it is possible 
the dramatic vision this draft hopes to evoke, may never materialize.
    We are particularly concerned that the creation of three new 
regulatory classifications for communications infrastructure as 
suggested in this draft unnecessarily ignores that the communications 
industry is converging into an industry where carriers will offer 
voice, video and data. What is important is the one pipe that carriers 
will offer their services over, not what technology is utilized. What 
is needed is a broad definition of communications services that 
includes all services, regardless of the technology used to deliver the 
service or the regulatory classification of the service that are 
capable of supporting 2-way voice communications, data, video and any 
new advanced services used to communicate. A regulatory regime is 
necessary that regulates like services in a like manner regardless of 
technology used. This regime must account for high cost networks and 
protect the integrity of the infrastructure that all of these providers 
equally rely upon to offer their services. This is the only way to 
preclude the sort of arbitrage that has already been allowed to occur 
under today's regulatory classification scheme and that would surely 
continue under the approach envisioned by this draft.
    Our overriding concern with the structural approach of the bill 
notwithstanding, the drafters have identified and attempted to address 
several areas that are of specific concern to the rural sector of the 
industry. Yet we fear many of these may require additional 
clarification as well. For example, while its reference to 
interconnection duties in sections 103 and 203 are appropriate, and the 
drafters have deleted some of the troubling provisions from the earlier 
draft, we continue to believe more clarity is called for to ensure they 
truly accomplish what is necessary from a rural provider perspective. 
The rural industry has always been in a difficult position when it 
comes to negotiating such matters because frankly there is little 
incentive for others to come to the bargaining table with a small rural 
carrier. The degree to which matters such as this can be given more 
clarity will benefit all rural americans.
    In addition, if the regulatory silo approach of the draft is 
preserved we believe the interconnection, and reciprocal compensation 
arrangements discussed above should be clarified to apply to all titles 
of the act. If regulatory equity among industry segments is truly the 
committee's objective then this is a must. The draft in question today 
is complex and requires careful review. We intend to continue our 
scrutiny of its details and will certainly be happy to provide the 
committee with additional viewpoints as they emerge. In the meantime, 
it is important that the committee is fully aware of the rural sector's 
thoughts regarding any rewrite of our communications statutes.
    Earlier I had alluded to the fact that in our mind any rewrite 
initiative must ensure the ability of carriers to fully recover costs 
and to have fair access and interconnection capabilities. Indeed, 
moving into this debate we put forth the following specific concepts 
that we believe must govern the construction of communications policy 
for the future which is based on the following general principles:
Regulatory approach--
 Must be approached from a flexible perspective. Placing all carriers 
        on an equal regulatory footing is an admirable goal yet one 
        that does not equate total deregulation.
 The rural sector has, and will, necessarily continue to rely upon the 
        preservation of a certain level of regulation that is inclusive 
        of industry responsibilities that all must live up to.
 Typically, a federal/state partnership works best to meet the needs 
        of rural consumers.
Universal service--
 General issues:
 The universal service fund must continue to be an industry funded 
        mechanism, and neither supported through general tax revenues 
        nor subjected to the federal anti-deficiency act.
 Contribution issues:
 The base of contributors must be expanded to include all providers 
        utilizing the underlying infrastructure, including but not 
        limited to all providers of 2-way communications regardless of 
        technology used.
 Support shall be made available for the cost recovery needs of 
        carriers deploying broadband capable infrastructure.
 The contribution methodology must be assessed on all revenues or a 
        revenues hybrid that ensures equitable and nondiscriminatory 
        participation.
 The regulatory authority to modify the scope of contribution 
        obligations as technology evolves must be clarified and 
        strengthened.
 Distribution issues:
 Support must be used to construct, support, and maintain networks to 
        benefit all consumers and must not be voucher, auction, or 
        block grant based.
 Support must be based upon a provider's actual cost of service.
 Support must not be used to artificially incite competition.
 The rural and non-rural fund distinctions must be maintained.
 Rules must be streamlined to encourage acquisitions of adjacent 
        underserved exchanges.
Intercarrier compensation--
 Carriers must be compensated for all traffic utilizing their 
        networks.
 Carriers must identify their traffic to discourage arbitrage and 
        phantom traffic. Identifying information must be passed along 
        by all intermediate carriers.
 Appropriate transitional time frames are necessary to ensure 
        continued access to quality/affordable communication services 
        in rural areas.
Network access/interconnection--
 All providers must continue to have the obligation to allow other 
        providers to interconnect with their networks.
 Default rates, terms, and conditions for access to and use of network 
        facilities must be maintained as technology evolves.
 Rural providers must have realistic access to spectrum.
Video content--
 Providers must have non-discriminatory access to video content at 
        reasonable and non-discriminatory rates, terms, and conditions 
        regardless of distribution technology used.
 Non-disclosure, tying, and exclusive programming agreements regarding 
        rates must be prohibited.
 Predatory pricing by large incumbent cable operators must be 
        prohibited.
    In terms of a broader rewrite of the communications act, we would 
implore the committee to remain cognizant of these specific areas that 
are so critical to rural carriers and the consumers they serve. If you 
are able to do that you will have successfully ensured the creation of 
an environment that will sustain the nation's commitment to ensuring 
all Americans with access to comparable affordable communications 
services now and in the future. Thank you.
    Mr. Upton. Well, I want to thank all of you for staying this long. 
I hope you didn't line have sitters this morning. I saw some early this 
morning when I came in at 7. And I do want to just note for the record 
that--and in spite of not having a lot of members now--remember we 
started very early this morning--we have had 28 members on both sides 
of the aisle participate, which is not quite a record, but it shows the 
interest, obviously, of this legislation, and I don't think anyone 
quite figured that it would last this long with the number of votes 
that we had today. And I would just make a motion that all members of 
the subcommittee have a couple days to submit questions in writing that 
you might be able to respond. We will keep the record open to include 
that, if it happens.
    I have a couple of questions before I yield to either one of my 
Democratic colleagues or the Vice Chairman of the subcommittee Mr. 
Bass. I want to start, I guess, first of all with Mr. Bowe. Again, we 
appreciate your participation today. I have two questions. I will ask 
them both and then let you respond. One, in your testimony, you state 
that home access to the Internet has just passed 50 percent. How many 
people with disabilities would you estimate that are currently unable 
to access and use the Internet today due to the accessibility issue? 
That is No. 1. My second question is the bill--this draft would require 
manufacturers and service providers to make broadband equipment and 
services accessible to people with disabilities unless doing so would 
cause an undue burden. In your opinion, how will the change from 
today's readily achievable standard to the undue burden standard impact 
the lives of people with disabilities?
    Mr. Bowe. Thank you, Mr. Chairman. To take them in order, first, 
the proportion of Americans with disabilities who are not able to 
access the Internet because of accessibility issues specifically--we 
don't have a particular number. I can give you some guesses, but----
    Mr. Upton. Okay.
    Mr. Bowe. [continuing] I can't give you a specific number. I would 
guess something in the order of 20 to 30 percent, and the reason I say 
that is that is a--issue specific to different--or different web sites. 
Most web sites and most places that you go to on the web are not 
accessible for people with learning disabilities and people who are 
blind. The vast majority do not comply with standards for 
accessibility. That being so, your bill does not get into regulating 
that, so I don't want to go too far with the 20-percent number. There 
are others who is having to do with affordability and having to do with 
the availability of the basic equipment. Those issues are beyond the 
question that you asked me. But if you ask about public school children 
with disabilities, those nearly 100 percent of them gain access every 
school day because they do it from school. Once you help people leaving 
in school and living in adulthood, give affordability so that would 
reduce your number. Okay.
    And your other question on me, undue hardship defense of 
manufacturers. First of all, the 1996 Act, as you well know, required 
that excessive parody--was readily achievable, but we are now in--of 
any effort with the manufacturers of hardware and software and the 
providers have services have been asked to make access accessible if 
they can do it, and if they can't, to please explain why they can't. I 
think by now they certainly have experience--9 years of experience with 
us. Now, but I also want to make the point that today's technologies, 
from the cell phones that we use, to PDAs, even to desktops, we are not 
talking about machines that have a shelf-life in months, maybe up to a 
year. And also we have things that are very, very heavy in software 
that if I want to put a new version of a cell phone or a new version of 
a PDA, what I do is just plug in some new card. Now with all of these 
cases, you can make something accessible, much easier, much faster and 
much cheaper than you could in 1995 and 1996. For all--undue burden 
standard is not a--difficult standard for them to meet. I don't think 
it would have any reasonable impact on them at all.
    Mr. Upton. Okay. Thank you. I know my time is expired. Mr. Bass has 
waited. I have some other questions, but I will yield to Mr. Bass for 5 
minutes.
    Mr. Bass. Thank you. I thank the Chairman, and I think I am only 
going to ask one question, a general question, so you can continue. Mr. 
Wilson, you dealt more than--I don't have a specific question for you. 
You dealt more than anybody else, I believe, in the issue of rural 
services and how this bill would affect that, and I am reviewing your 
testimony now. I am wondering whether there are any aspects of this 
staff draft, any additions that we might be able to make, any leverage 
points, or incentives, or thoughts or anything that we might employ 
that would maximize the deployment of advanced services to rural 
communities like the 179 or 180 or so that I represent in New 
Hampshire?
    Mr. Wilson. Well, sir, I think--speaking on behalf of rural 
companies--I think, you know, we are very interested in going forward 
with advanced networks to offer all these new services to our 
customers. I think the main thing we need going forward is a stable 
environment of--you know, things are still uncertain and it is very 
difficult to make investments because we don't know what is going to 
happen. Everything is just a flux these days. We need--stability and a 
strong Universal Service policy, something we can count on before--and 
where we can make investments and recover those costs, we as rural 
carriers will build those networks to deliver those advanced services 
to the rural consumers across this country. In many cases, we are 
already well under way doing that.
    Mr. Bass. Does anybody else have any comments on it or not? Then, 
finally, Mr. Wilson, the--I am reading your summary. The provision 
allowing for new government networks to compete with existing carriers 
has always been a concern to the rural industry and is inconsistent 
with their position in that regard. You are not referring to Section 
409 the government authority to provide services, is that what you are 
referring to, or something else?
    Mr. Wilson. I am totally not sure of exactly what Section.
    Mr. Bass. Okay.
    Mr. Wilson. But, no, sir, we do not agree with government competing 
with us in networks. I just don't believe our tax dollars be used 
against us that way than providing dollars----
    Mr. Bass. If we weren't involved, would you have a problem with it?
    Mr. Wilson. Well----
    Mr. Bass. If the municipalities had--if there was no provision--if 
a small community, for one reason or another, they couldn't get the 
kind of services that larger communities could get and the community 
itself decided to undertake the challenge of providing broadband high-
speed services itself, and they charged their customers for that. It 
wasn't--they didn't use money that they were collecting for the 
recycling center or for plowing roads and so forth, would there be a 
problem with that?
    Mr. Wilson. In most cases that I am aware of in rural communities, 
our rural carriers are very attentive to their customer base and 
delivering services such as you are talking about here. I just think 
that we should always be careful in opening the door to allow 
government municipalities, or state, or whatever, to be in competition 
with us, you know. After----
    Mr. Bass. Do you think a rural community that is advised by 
whatever providers that exist that they just don't want to do it 
because it's not cost effective, that those citizens should be denied 
the ability to look for alternatives that might include a municipal 
plan?
    Mr. Wilson. I couldn't--I would have to agree with you there, that 
just because they are rural citizens, they should not be denied the 
access to such things if the provider fails to provide that service. I 
think you would have to be very specific in the case where the carrier 
of the--the local exchange carrier has failed to do so or refuses to do 
so, but I think in--again, in the cases I know of in the rural areas, I 
don't know of a case where a municipality already served by a rural 
company that the rural companies have not been attaining to meet their 
customers' needs, because we are very--you know, they are our 
neighbors, our friends, we live with them, and we hear from them 
regularly and we try to do our best to serve them. That is what we are 
all about is service to our customers.
    Mr. Bass. Any other comments?
    Mr. Kimmelman. Mr. Bass, I think that what we are finding is there 
are a lot of communities in which people do not have access to adequate 
broadband service, prices are high, or in some cases services isn't 
even available. One of the most admirable portions of this bill, I 
believe, is allowing communities to step in. And, as you heard this 
morning from EarthLink, they are paying for building a network in 
Philadelphia. They are building out--it is on their own nickel, and 
they are offering services as low as $10 a month for broadband access--
wireless access. I would love to see private enterprise do that, but 
where they won't, it certainly is enormously helpful to have the 
community band together and do it itself.
    Mr. Bass. Thank you, Mr. Kimmelman. I yield back.
    Mr. Upton. Mr. Markey?
    Mr. Markey. Thank you, sir. Thank you, Mr. Chairman. I apologize. 
Mr. Kimmelman, is there a concern from a consumers standpoint that the 
net neutrality right, the freedom to access all Internet content, or 
the ability to get higher bandwidth may still be available but simply 
for an extra fee or a higher price, how do you suggest that we address 
that very real consumer concern?
    Mr. Kimmelman. Well, first off, Mr. Markey, I think it is very 
important that if you look at the structure of the staff draft, that a 
lot of traditional terms of communications policy from Title I and 
Title II may no longer exist on the way it is written. We don't know 
what reasonable and unreasonable is under this draft. By the way, 
certain parts of the Communications Act appear to have been wiped out. 
But even if they are what they traditionally have been, it is left to 
private negotiations to work this our. And one major concern we have is 
that broadband providers start doing what cable companies have 
traditionally done, which is to say that you can have certain channels, 
but you have to buy these other channels to get it. You can have 
Internet access, but you have to buy our Internet access before you can 
buy something else. Pay me once, pay me twice, pay me three times. Now 
that may not be absolute blocking of applications and services, but it 
certainly is unfair and inflating prices for consumers.
    Mr. Markey. In the previous draft, we had a provision which 
prohibited a broadband video service provider from requiring a 
financial interest in a program service as a condition for carriage. 
The new draft deletes the prohibition. Do you think that that is a good 
policy decision?
    Mr. Kimmelman. I think it is quite dangerous, Mr. Markey. You will 
recall in the 1992 Cable Act, Congress put in such a provision related 
to cable because of previous abuses in the cable industry where 
channels could not be carried, they would not be carried, by the 
dominant cable companies unless the dominant company was allowed to own 
an equity stake in it. I think it was a wise choice to do then with 
cable, and it would be wise to do with any broadband provider that has 
a dominance over its platform.
    Mr. Markey. Mr. Barton asked the first panel if they preferred the 
first draft--bipartisan draft or the second draft--the one that we are 
talking about right now. Which of the two drafts did each of you 
prefer? Let us go down the list, the first draft or the second draft, 
if you had to pick one of the two?
    Mr. Bowe. I will pick option number 3.
    Mr. Markey. No, no, no. No, I know.
    Mr. Bowe. Because----
    Mr. Markey. I understand.
    Mr. Bowe. [continuing] with respect are identical----
    Mr. Markey. I understand what you are saying. I know where you are 
going. Mr. Clark, first draft or second draft?
    Mr. Clark. Oh, gosh. I mean, neither one meets the standards of----
    Mr. Markey. I understand that.
    Mr. Clark. [continuing] the framework----
    Mr. Markey. Which one heads further in the right direction?
    Mr. Clark. I will go with two.
    Mr. Markey. No. 1, Mr. Haasch?
    Mr. Haasch. No. 1.
    Mr. Markey. Mr. Kimmelman?
    Mr. Kimmelman. No. 1.
    Mr. Markey. No. 1.
    Mr. Wiginton. No. 1.
    Mr. Markey. No. 1.
    Mr. Wilson. I would have to abstain because we don't like neither 
of them.
    Mr. Markey. Well, but you know what, my mother once said to me, 
Eddie, people aren't going to compare you to the Almighty, only to the 
alternative. Okay. And that is how life is going to be. Okay? And that 
is how it is for you, Mr. Wilson, right now. No. 1 or No. 2?
    Mr. Wilson. If we are able to have more input in the process----
    Mr. Markey. Yes.
    Mr. Wilson. [continuing] and get some of the concerns that we have 
addressed?
    Mr. Markey. Yes.
    Mr. Wilson. Probably No. 2----
    Mr. Markey. Okay.
    Mr. Wilson. [continuing] if we are going to work with you.
    Mr. Markey. Okay. Thank you. That is very helpful to me. So the 
issues here now that I would like to move on to are the PEG access 
issues. The corporations rely on fees from franchise fees to fund 
operations over the length of the agreement. What concerns do you have, 
Mr. Haasch, if a franchisee qualifies for a national franchise prior to 
the expiration of a franchise agreement? What effect on your--will this 
have on your revenue expectations?
    Mr. Haasch. Well, clearly, that is if the bill goes forward with 
the modified gross revenue definition for a new entrant in the market. 
If the incumbent transitions to that new model, they also would be 
subject to the revised gross revenue definition, and therefore in 
essence reducing the compensation amount coming to the local 
government. That is the primary concern. I need to step back and also 
point out that under existing law, there is compensation from a cable 
operator that funds a PEG access operation above and beyond franchise 
fees. To us, to the Alliance, that is one of the glaring financial 
considerations in this bill.
    Mr. Markey. Okay. Mr. Clark, I just want to do a quick 
recapitulation of the vote. Did you really intend on voting for the No. 
2 and not the No. 1?
    Mr. Clark. Let me explain that. The--Congressman Markey, our 
Association--from an Association standpoint, the one thing that 
probably is preferable in one to two is that there are some more 
interstate interconnection nexus at that point and the State 
Commissions have more interconnection rights under the first one. From 
a personal standpoint, the reason that I picked two is because I think 
two does--and, again, this is not an Association view, but if I had to 
pick one or the other, I think two does a little bit more, perhaps, to 
allow for the tearing down of barriers to entry on the video side, and 
from a personal standpoint, the reason that I place a high value on 
that is I really believe that in the future Telecom market, video is 
going to drive a tremendous----
    Mr. Markey. And I appreciate----
    Mr. Clark. [continuing] amount of--so that is the reason for that.
    Mr. Markey. And you think that would be the--are you a Democrat or 
a Republican, by the way?
    Mr. Clark. I am a Republican.
    Mr. Markey. A Republican? Okay. That is helpful also to know. And 
you might be moving up, because I don't think you really do represent 
all of NARUC, Mr. Clark----
    Mr. Clark. Yes.
    Mr. Markey. [continuing] although I appreciate the fact that you 
are expressing your personal view here, I sincerely doubt that that is 
NARUC's position. So my view here--Mr. Bowe, you want to stick with 
number 3?
    Mr. Bowe. I would just like to add, from the disability point of 
view, we are in legal limbo. We are in a world of technology with no 
accessibility protection whatsoever. What we need, we need legislation. 
We need bipartisan cooperation.
    Mr. Markey. I am with you.
    Mr. Bowe. We need you to write a law and send it to the President. 
That is what we need.
    Mr. Markey. I wrote the close captioning language in the 1990, you 
know, bill dealing with new televisions. I wrote the language in----
    Mr. Bowe. I saw you make that first step there.
    Mr. Markey. [continuing] the Telecommunications Act. You know I 
agree with you and----
    Mr. Bowe. Absolutely.
    Mr. Markey. Okay. Thank you. Well, anyway, right now it is 6-4 in 
favor of the first draft over the first two panels, which is a good 
sign. And, Mr. Clark has a personal preference. I am not sure that 
NARUC is thrilled across the country with that position, but, 
nevertheless, we will--all right, we will let that sit. So, you know, 
here is what we have--and I appreciate, Mr. Chairman, that we are 
still--we are sitting here now pretty much alone, but I don't know--
have you already asked your questions? I don't know----
    Mr. Upton. Mr. Bass is going to get one more question.
    Mr. Markey. Okay. Great. Thank you. The one thing, just so I can, 
you know, lay this out--the one thing that I am most interested in is 
ensuring that we don't have a repetition of what happened back in 1996. 
Mr. Ellis, on the first panel, began by criticizing the regulations 
that were put on the books pursuant to the 1996 Act. Now, the Chief 
Counsel of SBC at the time, and all of regional companies, came into my 
office, and they begged us to pass the 1996 Act. And there was a good 
reason why, because they were tired of Judge Green's regulations, which 
were many more than 700 pages long over the preceding 15 years, and 
begged us to pass it.
    Now, Mr. Ellis seems to be upset that there was a 14 point 
checklist in the bill that they endorsed, and that there were 
rulemakings for all 14 points that were mandated in the bill. And so 
what was disturbing to me, to be honest with you, was that after the 
bill passed, SBC then brought a law case calling the legislation a bill 
of attainder, trying to strike down the entire bill so that they would 
be free from the judicial constraints of Judge Green and then free from 
the restraints in Congress. Now, you can imagine how upset people who 
had spent the preceding 6 years of their lives negotiating with SBC, 
and negotiating with the other Bells, became. And so there has to be, 
as we are going forward, no terminal logical inexactitude in what it 
is, that the users and consumers of all these new services are entitled 
to by law. It cannot be left to vague language subject to subsequent 
interpretation that could delay indefinitely the actual benefits 
flowing to consumers.
    But everyone should know this, that the 1996 Act was a complete 
success. 80 percent of all Americans now have broadband going past 
their front door. On the day that the bill passed, no homes in America 
had broadband. And this despite the fact that the Bells fought for the 
first 3 or 4 years any real progress on their front, but because it was 
happening from the CLECs and the cable companies and others, they had 
to join in. So now our chore is to make sure that the consumers derive 
the benefits from this interest which the cable--which the telephone 
companies now have, which I think is great. It doesn't help me when the 
Bells say that it will take them 40 years to deploy this service. From 
the moment in 1978 in this committee when we repealed the ban which the 
telephone companies had on the cable companies using their telephone 
poles, and we mandated that the telephone companies had to let the 
telephone companies had to let the cable companies use their telephone 
poles, it only took 10 years for the cable industry to wire 80 percent 
of America. The Bells sit here telling us it will take them 40 years 
for them to do that, 30 years later. Which, again, leaves observers 
wondering whether or not they--whether and how high their sincerity 
coefficient is.
    And, by the way, the cable companies served every single customer 
in America, which the Bells say they can't do. They need 40 years to do 
something without promising that they are going to serve every 
consumer. So if we can get a definition, if we can get some guarantees 
with regard to what it is exactly that consumers are going to get, what 
protections competitors are going to get, then I think we all are 
willing to be open-minded as we were in that first staff draft. But it 
cannot be a world in which ambiguity, obfuscation, lack of definition, 
characterizes what it is that is the final product.
    And so I thank you, Mr. Chairman, for this hearing. I think it has 
provided an enormous public service. Your witnesses were great and I 
hope that it is not our last hearing. I thank you, Mr. Chairman, very 
much.
    Mr. Upton. Thank you, Mr. Markey. I have one more question that I 
want to ask Mr. Haasch, and that is I want to get a better 
understanding of the 5-percent franchise fee as it relates to the PEG 
programming. From your experience from your testimony, you indicated 
that 40 percent of the contribution of the franchise fees for PEG in 
Kalamazoo--or comes to the facility in Kalamazoo, is that on the higher 
end, on average, or the lower end for a lot of communities?
    Mr. Haasch. It is tough to say. The community I came from, Ann 
Arbor, Michigan, over here----
    Mr. Upton. You can go like this. This is called the Big House.
    Mr. Haasch. The Big House?
    Mr. Upton. Yes.
    Mr. Haasch. 100 percent were dedicated to cable-related but----
    Mr. Upton. That is the question I wanted to come back to. How many 
communities actually contribute maybe 100 percent of that fee? Is that 
a majority? Is it 75 percent?
    Mr. Haasch. It certainly is not a majority, certainly not. I 
believe the Kalamazoo model, where a percentage anywhere in the 40- to 
60-percent range that goes to the access, and the balance goes to the 
community's general fund. I believe that is the prevailing structure. 
Ann Arbor and the few other communities that I know of where 100 
percent is dedicated to the cable programming, I believe they are the 
minority, although I do know that in talking with Ms. Praisner this 
afternoon, that community also dedicates 100 percent----
    Mr. Upton. Really?
    Mr. Haasch. [continuing] for their--yes.
    Mr. Upton. Well, would you say that you would prefer--do you think 
there would be general support that all of the monies of--that 
municipalities receive are dedicated to the PEG channels? Is that a 
good thing or a bad thing----
    Mr. Haasch. I know----
    Mr. Upton. [continuing] or percentage-wise, or where do you think 
it ought to be?
    Mr. Haasch. From the PEG community, certainly, although I had this 
conversation----
    Mr. Upton. What do you think is a reasonable request?
    Mr. Haasch. The concern is dictating to local government how they 
use that revenue. Revenue, although philosophically and conceptionally, 
I think a strong argument can be made that you are reinvesting in the 
system because you are creating local content, and I believe that is 
the hook of any discussion on that train.
    Mr. Upton. And I know that she is gone, but what do you think the 
cities would say, what level might they be able to support, would you 
guess, since you talked a little bit about her?
    Mr. Haasch. I hesitate to speculate, but in the even splits. If you 
are going to----
    Mr. Upton. 50? So you would say that 2.5 percent----
    Mr. Haasch. If you are going----
    Mr. Upton. [continuing] at least as a minimum----
    Mr. Haasch. [continuing] if you are going to----
    Mr. Upton. [continuing] to have to go to the PEG channels.
    Mr. Haasch. If you want to pursue that discussion with local 
government, I would suggest starting in that area. I--there would be a 
mixed bag of support.
    Mr. Upton. Okay. Well, it is 4:20. Mr. Clark and I are late for our 
4:10 plane, so we will how he does. It might not be a lot of people 
flying to North Dakota today. I am not sure. But I want to--we 
appreciate all your testimony.
    Mr. Bass. Can I ask one more question, Mr. Chairman?
    Mr. Upton. Yes. Mr. Bass.
    Mr. Bass. And if it is not relevant to this panel, just don't 
answer it, but I am curious to know if anybody has any perspective on 
the one--for video, on the one--on the Federal franchise versus 50 
franchises or State-wide franchise issues. Does anybody--the bill has a 
single franchise provision for video. Is there concern about that or 
are there alternatives? If nobody wants to respond to it, you can 
leave.
    Mr. Wilson. From the rural companies point of view, that is a real 
issue for us.
    Mr. Bass. Okay.
    Mr. Kimmelman. I would just say, Mr. Bass, that we are agnostic. 
The communities, we think, have done a good job in a number of areas, 
but we also see there is not enough competition for video. We need to 
speed something up. So whether you create a scheme whereby it would be 
up to the States or you do it federally, what is important to us is 
there needs to be substantial local input in meeting community needs, 
whether it is Federalized or whether you delegate it back. But, we do 
believe it is critical that you look to speeding up competition for 
video.
    Mr. Haasch. I would reiterate Mr. Kimmelman's point about community 
needs, and from the Alliance's viewpoint, as long as PEG access and the 
development and funding and support for local content, Federal versus 
State model, from the Alliance's standpoint, is neutral.
    Mr. Bass. Thank you, Mr. Chairman.
    Mr. Upton. Thank you all for being here. Hearing is adjourned.
    [Whereupon, at 4:22 p.m., the subcommittee was adjourned.]
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