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



 
                             THE COMMUNICATIONS
                        OPPORTUNITY, PROMOTION, AND
                          ENHANCEMENT ACT OF 2006
_____________________________________________________________________

                             
                                 HEARING

                                BEFORE THE

             SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET

                                  OF THE 

                           COMMITTEE ON ENERGY AND 
                                 COMMERCE
                           HOUSE OF REPRESENTATIVES


                        ONE HUNDRED NINTH CONGRESS

                                SECOND SESSION

                                  ________
                                  
                               MARCH 30, 2006
                                  ________
                                  
                                  
                             Serial No. 109-83

         Printed for the use of the Committee on Energy and Commerce




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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,  Mississippi Albert R. Wynn, Maryland
  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, 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,  Mississippi Rick Boucher, Virginia
Vito Fossella, New York                   Edolphus Towns, New York
George Radanovich, California             Frank Pallone, Jr., New Jersey
Charles F. Bass, New Hampshire            Sherrod Brown, Ohio
Greg Walden, Oregon                       Bart Gordon, Tennessee
Lee Terry, Nebraska                       Bobby L. Rush, Illinois
Mike Ferguson, New Jersey                 Anna G. Eshoo, California 
John Sullivan, Oklahoma                   Bart Stupak, Michigan
Marsha Blackburn, Tennessee               John D. Dingell, Michigan
Joe Barton, Texas                          (Ex Officio)
  (Ex Officio)
  

















                                 CONTENTS
                                 ________
                                                               Page
Testimony of:
  Fellman, Hon. Kennety, Esq., Mayor, Arvada Colorado, on 
   behalf of The National Association of Telecommunications 
   Officers and Advisors, The National Association of 
   Counties, The National League of Cities, and The United 
   States Conference of Mayors.............................     59 
  McCormick, Walter, President and Chief Executive Officer, 
   United States Telecom Association.......................     71
  McSlarrow, Kyle, President and Chief Executive Officer, 
   National Cable & Telecommunications Association.........     76 
  Regan, Timothy, Senior Vice President, Global Government 
   Affairs, Corning Incorporated...........................     86
  Misener, Paul, Vice President for Global Public Policy, 
   Amazon.com..............................................     96 
  Keefe, David J., Chief Executive Officer, Atlantic 
   Broadband, on behalf of The American Cable Association..    104
  Fritz, Jerry, Senior Vice President for Legal and 
   Strategic Affairs and General Counsel, Allbritton 
   Communications Company, on behalf of The National 
   Association of Broadcasters.............................    108 	
  Citron, Jeffery, Chairman and Chief Strategist, Vonage...    194 
  Rodriguez-Lopez, Lillian, President, Hispanic Federation.    257
  Johnson, Julia, Chairman, Video Access Alliance..........    260
  Riddle, Anthony Thomas, Executive Director, Alliance for 
   Community Media.........................................    265
  Kenney, Jeannine, Senior Policy Analyst, Consumers Union.    282
  May, Randolph J., Senior Fellow and Director, 
   Communications Policy Studies, The Progress & Freedom 
   Foundation..............................................    293
  Makawa, James, Co-Founder and Chief Executive Officer, 
   The Africa Channel......................................    305
Additional material submitted for the record:
  Freudentah, Bob, President, American Public Works 
   Association, prepared statement of......................    320 
  McCormick, Walter, President and Chief Executive 
   Officer, United States Telecom Association, response 
   for the record..........................................    323 
  Misener, Paul, Vice President for Global Public Policy, 
   Amazon.com, response for the record.....................    325 










                     THE COMMUNICATIONS 
                  OPPORTUNITY, PROMOTION, AND 
                    ENHANCEMENT ACT OF 2006
 
                        ___________
                        
                  THURSDAY, MARCH 30, 2006

                                House of Representatives,
                             Committee on Energy and Commerce,
                 Subcommittee on Telecommunications and the Internet,
                                                      Washington, DC.


The subcommittee met, pursuant to notice, at 10:08 a.m., in Room 2123 
of the Rayburn House Office Building, Hon. Fred Upton (Chairman) 
presiding.
	Members present:  Representatives Bilirakis, Stearns, Gillmor, 
	Whitfield, Cubin, Shimkus, Pickering, Radanovich, Bass, 
	Walden, Terry, Ferguson, Blackburn, Barton (ex officio), 
	Markey, Engel, Wynn, Doyle, Gonzalez, Inslee, Boucher, 
	Pallone, Gordon, Rush, Stupak, Dingell (ex officio), Solis 
	and Buyer.
	Staff present:  Howard Waltzman, Chief Counsel for 
	Telecommunications and the Internet; Kelly Cole, Counsel; 
	Billy Harvard, Legislative Clerk; Anh Nguyen, Legislative 
	Clerk; Jaylyn Jensen, Senior Legislative Analyst; Neil Fried, 
	Counsel; Will Nordwind, Policy Coordinator; Peter Filon, 
	Minority Counsel; Johanna Shelton, Minority Counsel; David 
	Vogel, Minority Research Assistant; and Chris Treanor, 
	Minority Staff Assistant.
Mr. Upton.  Thank you, Mr. Vice Chairman.  Good morning.  Today's 
hearing is on the Communications Opportunity, Promotion, and 
Enhancement Act--bipartisan legislation introduced by Chairman 
Barton, Mr. Rush, Mr. Pickering, and myself.  I want to thank those 
Members in particular for their tremendous bipartisan cooperation, 
input and work.  
	The whole effort with this legislation is about removing the 
	governmental roadblocks which are getting between consumers' 
	wallets and the increased competition, lower prices, greater 
	choice, and better service quality in the video marketplace 
	which they desperately deserve.   In the 21st century, with 
	cable and two competing national satellite TV providers, 
	which have about a quarter of the MVPD marketplace, 
	technology has put the days of one-video-provider-per-town 
	behind us; and with phone companies poised to offer yet 
	another competitive video choice to consumers, we can truly 
	kick competition into high gear.  
Yet with approximately 33,000 local franchise authorities nationwide, 
the current locality-by-locality-by-locality franchise negotiation 
process is standing in the way of progress.  So, it is time to bring 
that process into the 21st century--to catch up with the changes in 
technology and the marketplace--so that the consumer can reap the 
benefits as soon as possible.  
This bipartisan legislation marries up three mutually important 
principles.
	First, it establishes a national franchise option to 
	streamline entry into the marketplace and speed-up delivery 
	of more competitive video choices for consumers.  
Second, the bill not only preserves the option for cable operators 
and localities to strike their own local franchise deals in lieu of 
a national franchise, but also preserves--in the national franchise--
critically important elements of the legacy local franchise 
framework, namely: number one, local control over rights-of-way; two, 
a franchise of up to five percent of gross revenues; three, required 
carriage of public, educational, and governmental programming, PEG; 
and four, an additional one percent of gross revenues on top of the 
five percent franchise fee for PEG and institutional network support.
Third, the bill seeks to create a level regulatory playing field for 
all wireline video providers, given the competitive nature of the 
marketplace so that the consumers--and not the government--will 
choose the winners and losers in the marketplace.
	Moreover, I want to highlight another important element of 
	the bill which I believe will also be of great value to 
	local governments.  Title IV of the bill prohibits States 
	from preventing local governments from providing 
	telecommunications information or cable services.  In my 
	view, if a local government wants to provide, or facilitate 
	the provision of, its own services for the benefit of its 
	citizens, then our national communications policy should be 
	able to permit that.
	In closing, I want to also mention all of the work that 
	Mr. Dingell and Mr. Markey invested with us in this issue.  
	It is my hope that we can build on the bipartisanship of 
	the legislation before us today.  I look forward to working 
	with them, Members who have also spent a lot of time on the 
	issue like Mrs. Blackburn, Mr. Wynn, Mr. Buyer, and all 
	members of this subcommittee and committee in the days to 
	come.  It is our attention to markup this legislation in 
	subcommittee next week, and move towards full committee 
	markup shortly after the Easter District Work Period ends.  
Again, I want to commend Chairman Barton, Mr. Rush, Mr. Pickering, 
and their staff, all staffs for getting us here today.  I look 
forward to the testimony of today's witnesses and I yield to the 
Ranking Member of the subcommittee, the gentleman from Massachusetts, 
my friend, Mr. Markey.
	[The prepared statement of Hon. Fred Upton follows:]

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

Good morning.  Today's hearing is on the Communications Opportunity, 
Promotion, and Efficiency Act -- bipartisan legislation introduced 
by Chairman Barton, Mr. Rush, Mr. Pickering and myself.   I want 
to thank those Members for their tremendous, bipartisan cooperation, 
input, and work.
This whole effort is about removing the governmental roadblocks 
which are getting between consumers' wallets and the increased 
competition, lower prices, greater choice, and better service quality 
in the video marketplace which they desperately deserve.   
In the 21st century, with cable and two competing, national satellite 
television providers, which have about a quarter of the MVPD 
marketplace, technology has put the days of one-video-provider-per-
town behind us; and with phone companies poised to offer yet another 
competitive video choice to consumers, we can really kick competition 
into high gear.  
Yet with approximately 33,000 local franchise authorities nationwide, 
the current locality-by-locality-by-locality franchise negotiation 
process is standing in the way of progress.   So, it's time to bring 
that process into the 21st century -- to catch-up with the changes in 
technology and the marketplace -- so that the consumer can reap the 
benefits as soon as possible.   
This bipartisan legislation marries-up three mutually important 
principles:
	First, it establishes a national franchise option to streamline 
	entry into the marketplace and speed-up delivery of more 
	competitive video choices for consumers;
	Second, the bill not only preserves the option for cable 
	operators and localities to strike their own local franchise 
	deals in lieu of a national franchise, but also preserves -- 
	in the national franchise -- critically important elements of 
	the legacy local franchise framework, namely:  (1) local 
	control over rights-of-way; (2) a franchise fee of up to 5% 
	of gross revenues; (3) required carriage of public, 
	educational, and governmental (PEG) programming; and (4) an 
	additional 1% of gross revenues - on top of the 5% franchise 
	fee -- for PEG and institutional network support.  
	Third, the bill seeks to create a level regulatory playing 
	field for all wireline video providers, given the competitive 
	nature of the marketplace, so that consumers--and not the 
	government--will choose the winners and losers in the 
	marketplace.
	Moreover, I want to highlight another important element of 
	the bill, which I believe will also be of great value to 
	local governments.  Title IV of the bill prohibits states 
	from preventing local governments from providing 
	telecommunications, information, or cable services.   In my 
	view, if a local government wants to provide, or facilitate 
	the provision of, its own services for the benefit of its 
	citizens, then our national communications policy should be 
	to permit that.   
	In closing, I do want to mention all of the work that 
	Mr. Dingell and Mr. Markey have invested, with us, in this 
	issue.  It is my hope that we can build on the bipartisanship 
	of the  legislation before us today, and I look forward to 
	working with them, Members who have spent a lot of time on 
	this issue like Ms. Blackburn,  Mr. Wynn, and Mr. Buyer -- 
	and all Members of this Subcommittee and Committee -- in 
	the days to come.  It is my intention to mark-up this 
	legislation in Subcommittee next week, and move toward full 
	Committee mark-up after the Easter District Work Period.  
	Again, I want to thank Chairman Barton, Mr. Rush, and 
	Mr. Pickering--and their staffs--for getting us here today, 
	and I look forward to the testimony of today's witnesses.

	Mr. Markey.  Thank you, Mr. Chairman, my friend, as well.  
	We are calling this hearing on this very important 
	legislation which addresses various subjects, and although 
	there are a multitude of issues in this bill including 
	several provisions I wholeheartedly support, such as the 
	ability of municipalities to provide community broadband 
	services, I will focus my remarks this morning on just two 
	items.
	First, network neutrality.  In my view, rules ensuring 
	network neutrality are indispensable.  I understand that 
	there are those who argue that we should rely on mere 
	network neutrality principles or an imprecisely worded FCC 
	policy statement rather then legally enforceable rules.  
	Others will advise us to take a wait-and-see approach.  Yet 
	we know from public statements from several industry 
	executives that the owners of the broadband wires into our 
	homes would like to start charging fees to Internet content 
	providers.  In other words, they want to artificially 
	constrain the supply of Internet-based content and services 
	to high bandwidth consumers.  This represents nothing more 
	than the imposition of a broadband bottleneck tax on 
	electronic commerce.  Such a bottleneck tax for accessing 
	consumers will undoubtedly have a chilling effect on 
	investments and innovation.
	There are some out there who will inevitably ask the 
	question, but why shouldn't Google pay?  Google certainly 
	has a very large market gap and presumably could afford to 
	pay, but that is precisely the wrong question to ask.  The 
	question to ask is whether Larry Page and Sergey Brin could 
	have afforded to pay around 1998, whether Yahoo Chief Jerry 
	Yang could have afforded to pay a broadband behemoth around 
	1995, whether Mark Andresen, the founder of Netscape, could 
	have afforded to pay anyone anything around 1994.  If there 
	is an entrepreneur in some proverbial garage somewhere today 
	whose idea is new, whose product is still in beta, their 
	dreams are just as real and valid as Sergey's and Larry's 
	and Jerry's and Mark's were an Internet generation ago.  We 
	should be doing everything we can in public policy to ensure 
	that this successful Internet model continues to drive 
	innovation, economic growth, and job creation.
	Instead, the proposed bill before us effectively condones 
	online discrimination and then ties the hands of the agency 
	from promulgating any guidelines to address it.  The Barton 
	bill actually says to the FCC that it can never adopt rules 
	to protect the Internet experience for the millions of 
	entrepreneurs and consumers who rely upon it.  Think about 
	that.  If there is a problem, even if it widespread or 
	affects a whole class of users or a whole class of 
	violators, if consumers are being aggrieved on a daily 
	basis or even if industry itself feels that certain rules 
	are useful or necessary, the Barton bill prohibits any 
	rulemaking authority for the FCC on network neutrality 
	whatsoever.  Rather, it prefers a case-by-case investigation 
	and adjudication of violations.  Does anyone here remember 
	how long it takes the FCC to deal with individual 
	complaints?  It often takes years.  And this bill is 
	supposed to prepare us for the 21st century broadband 
	future.  This is efficient government?  I don't think so.  
	No, that is neither futuristic nor efficient.  That is 
	chaos.  In short, the bill imperils the future of electronic 
	commerce and innovation to the www, the worldwide whims of 
	broadband barons and ties the hands of the agency in a way 
	that will legally prevent it from saving something very 
	special.
	And second, service area parity.  I want to briefly address 
	the proposed bill's lack of a cable service area requirement.  
	By failing to include a build-out provision to ensure service 
	area parity between a Bell company entering a franchise area 
	and the incumbent cable operator, the bill allows a national 
	franchisee to use public rights-of-way in a community but 
	serve only select neighborhoods within that community.  One 
	does not need a business degree to have a hunch that they 
	will focus deployment on the 30 percent of the town that has 
	70 percent of the revenue potential.  The bill, however, 
	compounds the consumer risk when the omission of a service 
	area requirement is considered in the context of an incumbent 
	cable operator qualifying for a national franchise.  Under 
	the proposal, an incumbent cable operator may similarly seek 
	a national franchise after the phone company arrives in a 
	franchise area even if the phone company is serving just one 
	household in the franchise area.  The lack of a service area 
	requirement at the national level then means that the 
	incumbent cable operator no longer has to serve the entire 
	franchise area either.
	This means that the incumbent cable operator will now be 
	free to skimp on service upgrades or withdraw service from 
	any part of their historic service area.  The incumbent 
	cable operator may also immediately raise rates in areas of 
	the community the phone company is not serving in order to 
	cross-subsidize its offering in the part of town the phone 
	company has chosen to serve.  In other words, although the 
	proponents of the bill will trumpet the notion that 
	consumers will receive lower prices, the reality for many 
	consumers is that the bill will unwittingly result in the 
	opposite:  higher prices, shoddier practices, lack of 
	technology upgrades, or outright withdrawal of service.  
	This represents a truly historic abandonment of decades of 
	policy and progress to get technology and competition out 
	to all Americans regardless of where they live.  It is 
	clearly a grave consumer protection flaw in the bill that 
	needs to be addressed.  I thank you, Mr. Chairman, for your 
	indulgence in giving me a little extra time in my opening 
	statement in this historic hearing.
	Mr. Upton.  I am taking it from your minutes of questions.  
	No, I am not.  I would like to make a unanimous consent 
	request that both Ms. Solis and Mr. Buyer who are not members 
	of the subcommittee but able to sit in and participate, and 
	without objection so ordered.  I yield at this point for an 
	opening statement to the gentleman from Florida, 
	Mr. Bilirakis.
	Mr. Bilirakis.  Thank you, Mr. Chairman.  Mr. Chairman, I 
	think that everyone agrees certainly that technology has a 
	dramatic impact on our daily lives.  Today there is ever 
	growing competition in a wide variety of areas.  Cell 
	phones, for example, continue to get smaller and smaller 
	with expanding capabilities.  I am amazed that it is 
	possible to watch television on a cell phone.  Individuals 
	can find any number of service plans that suit their 
	communications needs at competitive rates.  It is only 
	natural that consumers want to see greater and greater 
	choice when it comes to the services and products that are 
	available in their homes.
	The legislation we are examining today is intended to spur 
	competition in the video market.  While I do believe it is 
	important to expand consumer choice and options, I am 
	concerned that we take into account the critical role that 
	local governments play in the video market.  Although I do 
	not believe that local governments and local franchising 
	authorities should act as a barrier to greater competition, 
	they do have a responsibility to protect and maintain local 
	infrastructure and safeguard consumers.  So I believe it is 
	important that they continue to have the ability to act in 
	the public interest, and in that regard I am anxious to hear 
	from our wide array, and they are a wide array, of witnesses 
	today to get their perspectives on this legislative proposal.  
	Mr. Chairman, thank you.  This is a very complicated bill.  
	I know as a result of hearings like this we are going to 
	learn much more about it.  Thank you, sir.
	[The prepared statement of Hon. Michael Bilirakis follows:]

Prepared Statement of the Hon. Michael Bilirakis, A Representative 
in Congress from the State of Florida

Thank you, Mr. Chairman.
I think everyone agrees that technology has a dramatic impact on our 
daily lives.  Today, there is ever growing competition in a wide 
variety of areas. Cell phones, for example, continue to get smaller 
and smaller with expanding capabilities.  I am amazed that it is now 
possible to watch television on a cell phone.  Individuals can find 
any number of service plans that suit their communications needs at 
competitive rates.  It is only natural that consumers want to see 
greater and greater choice when it comes to the services and 
products that are available in their homes.
The legislation we are examining today is intended to spur 
competition in the video market.  While I do believe it is important 
to expand consumer choice and options, I am concerned that we take 
into the account the critical role that local governments play in 
the video market.  Although I do not believe that local governments 
and local franchising authorities should act as a barrier to greater 
competition, they have a responsibility to protect and maintain 
local infrastructure and safeguard consumers.  I believe it is 
important that they continue to have the ability to act in the 
public interest.  In that regard, I am anxious to hear from our 
wide array of witnesses today to get their perspectives on this 
legislative proposal.  
Thank you, Mr. Chairman.  I look forward to working with you and my 
colleagues on this important issue as we move forward.

	Mr. Upton.  I recognize Mr. Dingell for an opening 
	statement.
	Mr. Dingell.  Mr. Chairman, I thank you for your courtesy 
	and I thank you for having this hearing.  The title of this 
	hearing might be a funny thing happened on the way to the 
	forum.  We are well on the road to achieving a bill which 
	could have had broad bipartisan support, could have addressed 
	in a real way the concerns of the American people, could have 
	allowed the Bells to enter into a national franchise and to 
	have achieved it in a way which would not only have been fair 
	to American consumers, but which could have been broadly 
	accepted throughout the industry and which would have had 
	support of Members on both sides.  It was interesting to note 
	how close we were when all of a sudden the wheels came off 
	and all of the lashings wrapped around the axle and 
	everything stopped.
	This is an important bill for American consumers and for our 
	economy.  I want to make it clear that I had and hope to 
	again be a supporter of a national video franchise.  I would 
	note that I have been a long-term friend of the Bell 
	companies but I do not support the legislation being 
	discussed today because it is unfair, unwise, and bad public 
	policy.  As drafted, the proposed legislation would allow the 
	creation of the broadband equivalent of gated communities in 
	our towns, our cities, our countryside as well as on the 
	Internet.  Public rights-of-way would be hijacked for the 
	profits of large private companies which are under this draft 
	freed of the important obligations to serve the public.  I 
	support fair competition, but this bill does not create fair 
	competition.  We should not write legislation at the expense 
	of leaving some of our communities or some of our citizens 
	behind and we should not write legislation at the expense of 
	a free and innovative Internet.  Of course, some areas of 
	our country would likely see faster competition and lower 
	cable rates as a result of national franchising--some.  But 
	according to this draft, these benefits will not extend to 
	everyone or everywhere.  Significant areas of our country 
	will be left behind and not all families in the family 
	community will share in the competitive showdown.  So the 
	less desirable or more remote parts of a town or the less 
	affluent parts of that town may see the cable rates increase 
	or watch as providers upgrade service to other parts of the 
	town and pass them by.  With many consumers put at risk by 
	paying higher cable bills or even losing cable service, this 
	bill violates the fundamental legislative principle of first 
	do no harm.  So there are tough questions that we have to 
	ask about this legislation, and we will ask them.
	First, why are there no real protections to ensure that 
	communities and neighborhoods will not be left behind as new 
	telecommunications infrastructure is deployed?  When it 
	comes to using public rights-of-way to offer cable service, 
	the current framework has worked in allowing a build-out over 
	a reasonable period of time at the local level.  Why should 
	we abandon the system of universal service that has served 
	this nation so well in terms of a profit-making opportunity 
	for companies of great affluence at the expense of people of 
	limited means? 
	Second, when cable operators who become national franchisees 
	are released from obligations to serve or upgrade certain 
	parts of town, how will those residents be affected?  I think 
	everyone knows the answer to that.  Does this create a legal 
	entitlement to differing services and differing levels of 
	service depending on the demographics of a neighborhood?  It 
	certainly looks that way.
	Third, will the unfortunate result of this bill be years of 
	litigation?  The national franchise requirements contain many 
	ambiguities.  For example, are new methods of video delivery 
	covered or should the 1984 constructs be updated to provide 
	technology-neutral approach to cable service?  Those cities 
	continue to receive fees associated with video services when 
	these services are integrated with other capabilities.  Will 
	some of the people who will be beneficiaries of this 
	legislation be able to claim that they are not cable 
	providers and thus escape major parts of their 
	responsibilities?  That is a question that we intend to 
	inquire into with more than a little care.
	Fourth, the proposed legislation contains some curious 
	language regarding the issue of network neutrality.  What 
	would be the effect of allowing essentially private taxation 
	of the Internet?  Would the digital economy continue to 
	thrive?  Would consumer expectations be met?  Would treatment 
	be fair to all or would people be enriched in improbable and 
	improper ways?
	In some ways, this bill clearly benefited from the lengthy 
	bipartisan discussions held over the course of last year and 
	I want to commend my colleagues who have participated in 
	those.  In general, the bill generally reflects the value to 
	our citizens of franchise fees and the continuation of 
	support of diverse public educational and governmental 
	programming.  It recognizes at least in concept that local 
	governments play a constructive role in the oversight of 
	the communications infrastructure and the protection of 
	consumers.  It also recognizes that they are going to provide 
	the rights-of-way and things which are so important to having 
	this kind of thing move forward.  But it leaves other areas 
	of local responsibilities, rights, and privileges as well as 
	duties of the licensees or franchisees very much unclear.  
	Also troubling, the legislation preempts state and local 
	consumer protection laws and it assures no strong or 
	enforceable federal protections.  We are stripping citizens 
	of something that they and their governments have been able 
	to do for them over the years.
	This committee has deregulated cable service before.  Not 
	all of us will remember it.  But we have only then later 
	had to step in to address shoddy treatment and poor 
	treatment of consumers.
	Mr. Chairman, I thank you for holding this hearing.  The 
	draft raises many questions which must be answered 
	carefully.  I am not sure that the process is going to 
	achieve that purpose but we are going to try and see that 
	it does.  It is one thing to promise a new day of 
	competition.  It is quite another to deliver, especially 
	since the legislation and the vehicle has the number of 
	visible and obvious errors that we see before us.  We do 
	not want to leave millions of Americans vulnerable, having 
	to cope with no new services with higher cable rates, with 
	fewer competitive choices on the Internet, and a situation 
	which clearly favors certain providers and clearly favors 
	certain categories of Americans over others.  Thank you, 
	Mr. Chairman.
	Mr. Upton.  Thank you.  I recognize for an opening statement 
	the Chairman of the full committee, the gentleman from Texas, 
	Mr. Barton.
	Chairman Barton.  Thank you, Mr. Chairman, for holding this 
	important legislative hearing.  Today is the culmination of 
	over a year and a half of discussions by Members on both 
	sides of the aisle of this subcommittee and full committee, 
	and if you really look at it, it is half a decade of 
	discussions by the stakeholders about the need for a new 
	telecommunications act.  Previous attempts at increasing 
	innovation, choice, and lower prices for consumers have 
	focused on promoting competition within individual sectors 
	of the communications industry.  Time has shown, however, 
	that the best way to promote competition and innovation is 
	to encourage the deployment of advanced facilities-based 
	networks and competition across sectors.  The right approach 
	will invigorate the technical sector and produce jobs, 
	growth, and opportunity for all of America.  American 
	consumers will get an array of services and choices that were 
	unimagined just a few years ago.  
This is the approach the committee print before us seeks to take with 
respect to increased cable competition and the deployment of advanced 
broadband networks.  Cable service is interstate in nature, as the 
Supreme Court has long recognized.  Most video programming carried on 
cable systems is produced by national networks and distributed across 
State lines to a national audience.  Cable systems are also carrying 
increasing amounts of Internet-based video, voice and data services 
that cross State, as well as national, borders.
	Today there are thousands of local franchising authorities, 
	and each imposes disparate restrictions on the provision of 
	cable services in its particular franchising area.  The 
	requirement to negotiate such local franchises and the 
	patchwork of obligations local franchising authorities 
	impose, are hindering the deployment of advanced broadband 
	networks that will bring increasingly innovative and 
	competitive services to consumers.  The United States is 
	not even among the top ten nations in terms of broadband 
	deployment right now.  
The committee print seeks to address this concern and strike the 
right balance between national standards and local oversight.  
Thus, the committee print before us first of all preserves 
municipalities' existing authority to collect a franchise fee of 
up to five percent of gross revenues from cable service.  Second, 
it also preserves the municipalities' control over their local 
right-of-way.  Third, it continues to require carriage of public, 
educational, and governmental channels, otherwise known as PEG 
channels, and allows municipalities to increase the number of PEG 
channels over time.  It also preserves the institution networks 
used for governmental and other public safety purposes.  It also 
allows municipalities to collect an additional one percent of 
gross revenues to support PEG channels and institutional networks.  
It also allows municipalities, if they wish, to continue to 
negotiate a local franchise agreement.  It requires the FCC, the 
Federal Communications Commission, to establish national consumer 
protection and customer service standards that the municipalities 
may then enforce.
	At the same time, the committee print offers an 
	alternative, streamlined national franchise process.  This 
	will help expedite competitive cable entry, thereby 
	promoting the deployment of advanced broadband networks 
	that can offer new and exciting broadband video, voice and 
	data services.  
We have had multilateral discussions for a number of months with 
several members on the Minority side of the aisle.  Those 
discussions did not bear the total fruit that I thought they would.  
Having said that, we have entered into discussions with Congressman 
Rush and he has signed on as an original sponsor of the committee 
print.  We are very, very pleased to have Congressman Rush's support 
of the committee print before us.  I also want to thank Congressman 
Pickering and Congressman Upton for their strong work.  I would like 
to thank Mr. Dingell and Mr. Markey for their work as well, although 
they have not signed on to the committee print before us.
	I hope that other members from both sides of the aisle would 
	take a serious look at the legislative draft before us today 
	and join us in supporting the draft next week when we mark 
	it up in the subcommittee.  I look forward to today's 
	testimony and to next week's subcommittee markup, and to 
	marking it up in full committee within the next four or five 
	weeks.  With that, Mr. Chairman, I yield back.
	[The prepared statement of Hon. Joe Barton follows:]

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

Mr. Chairman, thank you for holding this hearing.  We stand on the 
threshold of a new age in communications.  The 1996 
Telecommunications Act served an important purpose, but technology 
and the markets have moved on.
Previous attempts at increasing innovation, choice, and lower prices 
for consumers have focused on promoting competition within individual 
sectors of the communications industry.  Time has shown, however, 
that the best way to promote competition and innovation is to 
encourage the deployment of advanced, facilities-based networks and 
competition ACROSS sectors.  The right approach will invigorate the 
tech sector and produce jobs, growth and opportunity for its workers.  
American consumers will get an array of services and choices that 
were unimagined just a few years ago.
This is the approach the committee print seeks to take with respect 
to increased cable competition and the deployment of advanced 
broadband networks.  Cable service is interstate in nature, as the 
Supreme Court has long recognized.  Most video programming carried 
on cable systems is produced by national networks and distributed 
across state lines to a national audience.  Cable systems are also 
carrying increasing amounts of Internet-based video, voice, and 
data services that cross state, as well as national, borders.
Today, there are thousands of local franchising authorities, and 
each may impose disparate restrictions on the provision of cable 
service in its local franchising area.  The requirement to negotiate 
such local franchises, and the patchwork of obligations local 
franchising authorities impose, are hindering the deployment of 
advanced broadband networks that will bring increasingly innovative 
and competitive services to consumers.
The committee print seeks to address this concern and strike the 
right balance between national standards and local oversight.  Thus, 
the committee print:
Preserves municipalities' existing authority to collect a franchise 
fee of up to 5 percent of gross revenues from cable service.
Preserves their control over local rights-of-way.
Continues to require carriage of public, educational, and 
governmental channels, referred to as PEG channels, and allows 
municipalities to increase the number of PEG channels over time.
Preserves institutional networks used for governmental and other 
public safety purposes.
Allows municipalities to collect an additional one percent of gross 
revenues to support PEG channels and institutional networks.
Allows municipalities to continue to negotiate local franchise 
agreements.
Requires the Federal Communications Commission to establish national 
consumer protection and customer service standards that the 
municipalities may enforce.
At the same time, the committee print offers an alternative, 
streamlined national franchise process.  This will help expedite 
competitive cable entry, thereby promoting the deployment of 
advanced broadband networks that can offer new and exiting broadband 
video, voice, and data services.
I thank Congressman Rush, the Chairman, and Mr. Pickering for 
sponsoring this bipartisan legislation with me.  I hope that other 
Members from both sides of the aisle will join us in supporting the 
bill.  I look forward to today's testimony and to an expedited 
Subcommittee markup of the legislation. I yield back.

	Mr. Upton.  Thank you.  Mr. Engel?
	Mr. Engel.  Thank you, Mr. Chairman.  I am going to condense 
	my remarks, and I thank my colleagues for letting me jump 
	over them.  I have to co-chair a hearing in about three 
	minutes and I will return to the hearing.  I want to thank 
	you, and I realize that not all of the committee's leaders 
	were able to come to a compromise, but I believe that this 
	bill before us reflects an enormous step forward from the 
	previous bill called BITS II.  My primary concern, like 
	everyone else, is to do what is best for the people of my 
	district and State, and for half the population of my 
	district, there is no viable competition in video services 
	because of tall buildings, so I am forced to seek ways to 
	bring competition to the video service industry.  I believe 
	that this legislation provides a road map by which all the 
	traditional telephone companies and the incumbent cable 
	service providers can move forward into a new era of 
	competition.  As Members of Congress, we obviously have to 
	strike the balance that will promote competition without 
	unduly benefiting one of those competitors, so I am pleased 
	that there is language in this bill that provides for fair 
	treatment of all communities and neighbors without regard to 
	income level.  I have pockets of vast poverty and enormous 
	wealth and all of these people should be able to avail 
	themselves of these new services.  I understand the language 
	regarding enforcement of so-called redlining is still under 
	development so I look forward to developing strong, clear 
	standards for enforcement.
	I am also very pleased about the inclusion of 911 services 
	for VOIP providers.  I believe that it would be 
	unconscionable for this Congress to adjourn without making 
	this simple but vital change to our laws.  It is a no-brainer 
	that when someone is in medical distress or the house is on 
	fire or someone has broken in, that the person calls 911.  
	Such a call should go seamlessly.  That having been said, we 
	must also require our PSAPs to upgrade their equipment to 
	handle these new technologies.  New York remains the poster 
	child of what not to do when it comes to cell phone 911 
	systems.  Millions of dollars were collected in cell phone 
	taxes and little actually spent on PSAP upgrades.  The same 
	thing cannot be allowed to happen again with VOIP.
	I have one concern which I hope we will be able to work out 
	as this bill moves forward.  I understand that the bill does 
	not impose on VOIP providers the same standards for 
	disability access as other voice providers.  As a longtime 
	champion of disabled and equal regulatory treatment, I want 
	to work with the Chairman at finding a way of making this 
	happen.
	And finally, let me say that there are net neutrality 
	provisions in this bill that many people have told me they 
	are very upset about.  I am hearing very different opinions 
	about what this language means and how it will impact the 
	future of the nation's telecommunications industry.  I want 
	to urge all parties to start working together to find common 
	ground.  I am open to listening to each and every argument 
	but there are such vast differences in interpretation, I am 
	just not sure what to think.  So I thank the Chairman and 
	my colleagues, and I yield back.
	[The prepared statement of Hon. Eliot Engel follows:]
	

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

Mr. Chairman:
I want to thank you, Mr. Barton, Mr. Dingell, Mr. Markey and your 
staff members for their hard work over the past many months. 
Though not all of the Committee's leaders were able to come to a 
compromise, I believe the bill before us reflects an enormous step 
forward from the previous bill, called BITS II.  
My primary concern is -- like everyone else here -- my primary 
concern is to do what is best for the people of my district and 
state.  For half the population of my district there is no viable 
competition in video services.  The fact that satellite is really 
not viable in the Bronx is matter of physics--it is not cable's 
fault nor satellite's.  Neither they nor this Congress can alter 
the laws of physics--though I believe some members of Congress 
have tried on a number of occasions.
So I am forced to seek ways to bring competition to the video 
services industry.  My constituents want this and they want it 
yesterday.
I believe that this legislation provides a road map by which all 
the traditional telephone companies and the incumbent cable 
service providers can move forward into a new era of competition. 
As members of Congress we must strive to strike the balance that 
will promote competition without unduly benefiting one of those 
competitors.
I am pleased that there is language in this bill that provides for 
fair treatment of all communities and neighborhoods without regard 
to income level.  I have pockets of vast poverty and enormous 
wealth.  All of these people should be able to avail themselves of 
these new services.  
I understand the language regarding enforcement of the
so-called-red--lining--is still under development.  I look forward 
to working with the Chairmen and ranking members and my good friend 
Bobby Rush in developing strong, clear standards for enforcement.
I am also very pleased about the inclusion of 911 services for 
VOIP providers.  I believe that it would be unconscionable for 
this Congress to adjourn without making this simple, but vital, 
change to our laws.  It is a no brainer that when someone is in 
medical distress, or their house is on fire, or someone has broken 
in that the person calls 911.  Such a call should go seamlessly.  
That having been said, we must also require our PSAPs to upgrade 
their equipment to handle these new technologies.  New York 
remains the poster child of what not to do when it comes to cell 
phone 911 systems.  Millions of dollars were collected in cell 
phone taxes and little actually spent on PSAP upgrades.  The same 
thing cannot be allowed to happen again with VOIP.
I have one concern which I hope that we will be able to work out 
as this bill moves forward.  I understand that the bill does not 
impose on VOIP providers the same standards for disability access 
as other voice providers.  As a long time champion of the disabled 
and equal regulatory treatment, I want to work with the Chairman 
on finding a way of making this happen. 
There are net neutrality provisions in this bill that people are 
very upset with.  I am hearing very different opinions about what 
this language means and how it will impact the future of the 
nation's telecommunications industry.  I urge all parties to start 
working together to find common ground.  I am open to listening to 
each and every argument, but there are such vast differences in 
interpretation, I am just not sure what to think.
I thank the chairman and yield back.

	Mr. Upton.  Yes, I would at this point ask unanimous consent 
	that all members of the subcommittee be able to insert their 
	opening statements as part of the record.
	Mr. Engel.  Thank you, Mr. Chairman.  I have Mr. Green's 
	statement and I thank you for doing that.
	Mr. Upton.  Without objection, and also remind my 
	colleagues that if they do not all read their statement, 
	they will get an extra three minutes on the first round 
	of questions, and at this point I would yield to 
	Mr. Gillmor for an opening statement.
	Mr. Gillmor.  Thank you, Mr. Chairman, and I want to 
	commend you and your staff for all of the time and the 
	effort that you have put in to formulating this legislation.  
	The latest committee print is aimed at furthering 
	deregulating an industry that has the potential to 
	revolutionize the way in which we do business, communicate 
	with family and friends, and conduct everyday tasks.  There 
	are very few opportunities that exist like the one before 
	the committee today, and I think we have to capitalize on 
	that opportunity to avoid stunting the growth of this 
	dynamic sector of our economy.
	More than a decade ago, Congress deregulated the wireless 
	industry and that venture has led to one of the most 
	competitive and consumer-friendly marketplaces in the tech 
	sector and I think that the committee print has the potential 
	for laying a similar path for increased competition in video 
	services.  Streamlining the franchising process will 
	ultimately result in lower consumer prices and greater access 
	to advanced telecommunications services including in districts 
	like mine.  However, despite its good intentions, there will 
	still be areas of the country where these services will not 
	be immediately within reach for one reason or another.  I 
	think that title IV of the proposed bill strikes the 
	appropriate balance by allowing public entities to enter 
	into this dynamic market on a competitively neutral basis 
	and I believe that the bill makes a concerted effort to 
	ensure the localities maintain their ability to be effective 
	stewards of the public domain.  I want to point out one 
	example which came to my attention recently of the advantages 
	of competition, and that was in France where I understand 
	that since they have opened their markets to competition, 
	it is possible now to get broadband Internet service, video, 
	and telephone all from one provider for less than $40 a 
	month, which is a far cry from anything that we see in this 
	country.
	This bill presents us with a unique opportunity to 
	effectively increase marketplace competition and consumer 
	choice while at the same time decreasing bureaucratic red 
	tape and the amount that consumers pay for their services 
	each month, and I yield back.
	[The prepared statement of Hon. Paul E. Gillmor follows:]

Prepared Statement of the Hon. Paul Gillmor, A Representative in 
Congress from the State of Ohio

Before I begin, I would like to thank you for holding this very 
important hearing and commend you and your staff for all of the 
time and effort put into formulating this legislation.  
Mr. Chairman, after many months of debate and negotiation, I am 
pleased to be here today to listen to the panelists and discuss 
the latest committee print aimed at further deregulating an 
industry that has the potential to revolutionize the way in which 
we do business, communicate with family and friends, and attend to 
everyday mundane tasks.  Very few opportunities exist like that 
which currently lies before this committee, and we must capitalize 
on this opportunity in order to avoid stunting the growth of this 
dynamic sector of our economy.
More than a decade ago, Congress took the leap of faith and 
deregulated the wireless industry-that venture has led to one of 
the most competitive and consumer-friendly marketplaces in the tech 
sector.  After reviewing the committee print, it is my belief that 
this legislation will lay a similar path for increased competition 
in video services.  
Streamlining the franchising process will ultimately result in 
lower consumer prices and greater access to advanced 
telecommunications services.  In a rural district such as mine, 
I am excited of the possibilities that this legislation could yield, 
such as increased access of advanced broadband services for rural, 
agricultural communities, more and better programming options at 
consumers' fingertips, and increased safety of VOIP telephony 
services through the continued integration of E911.  However, 
despite the well intentions of this legislation, there will still 
be areas of the country where these services will not immediately 
reach for one reason or another.  Therefore, I believe that 
Title IV of the proposed bill strikes the appropriate balance by 
allowing public entities to enter into this dynamic market on a 
competitively neutral basis with commercial providers.  
Finally, much has been said and will continue to be said about 
local control.  As a former Ohio state senator, I believe that 
this bill makes a concerted effort to ensure that localities 
maintain their ability to be effective stewards of the public 
domain.  Retaining the remittance of franchise fees, PEG channels, 
rights-of-way management, PEG support funding, and the ability to 
access fees for to rights-of-way management are just several 
examples of the extent that the Committee has gone to in order to 
ensure the preservation of local authority.  
Mr. Chairman, I would like to conclude my statement by saying that 
Chairman Barton's bill, the Communications Opportunity, Promotion, 
and Enhancement Act, presents us with a unique opportunity to 
effectively increase marketplace competition and consumer choice, 
while at the same time decreasing bureaucratic red-tape and the 
amount that consumers pay for their service each month.  
I look forward to the testimony from all of today's panelists and 
to the opportunity to ask several of them questions of my own as 
well as engage my colleagues in what is likely to be a lively 
debate.  Again, thank you Mr. Chairman for holding this important 
hearing.

	Mr. Upton.  I recognize Mr. Boucher for an opening 
	statement.
	Mr. Boucher.  Thank you very much, Mr. Chairman.  The 
	bill that is before us today is a mere shadow of its 
	former self.  I regret that it has abandoned the valuable 
	approach of earlier drafts which defined the permissible 
	boundaries of the regulation of Internet applications and 
	made certain that there would be a light regulatory touch.  
	That measure which Mr. Stearns and I had advanced was not 
	controversial.  It achieved the necessary purpose.  It is 
	not to be in the thin measure that is now before us.
	I support a one-stop Federal video franchise opportunity.  
	I think it is essential in order to provide additional 
	competition for cable television and satellite television 
	consumers.  The bill, in my view, appropriately addresses 
	this need, and it also creates a greater legal certainty 
	for municipalities that are seeking to offer commercial 
	telecommunications service and I support those provisions.
	The major shortcoming in the measure is the green light 
	that it gives to a practice which I fear will undermine 
	the openness and the accessibility of the Internet, 
	qualities that have made the Internet a major driving 
	force in the nation's economy.  Some last-mile broadband 
	providers have announced an intention to create a fast 
	lane into the home for content providers who will pay 
	them for fast-lane access and a slow lane for everyone 
	else.  In addition to limiting customer choice, I am 
	deeply concerned that this two-lane plan will have a 
	dramatic adverse effect on innovation.  The startup 
	struggling in a garage somewhere today will not be able 
	to afford to pay the fees to get into the fast lane over 
	the last mile and will be relegated to the slow lane.  
	It is not going to be able to compete with the 
	established Internet-based companies.  The risk that 
	permitting this dramatic change to the architecture of 
	the Internet will dampen innovation is real.  I think 
	it is a risk that simply is not worth taking, and we 
	don't have the luxury of simply sitting back and seeing 
	how things work out.
	Experience teaches us that when companies begin deriving 
	revenues from a business model, it is exceedingly 
	difficult to outlaw that model, and this is not something 
	we are going to be able to take back.  If we do nothing 
	today and five years from now innovation has suffered and 
	last-mile providers are deriving revenues from this new 
	business plan of a two-lane Internet, a fast lane and a 
	slow lane, it is going to be too late to make repairs, and 
	so as a part of this bill, we need a genuine network 
	neutrality provision, a provision that says that if a fast 
	lane is necessary perhaps for video or for gaming, then 
	all applications of a similar kind, no matter who provides 
	those applications, applications from any content provider 
	of that kind should be entitled to fast-lane access without 
	having to pay a charge.
	Mr. Chairman, I look forward to the debate on this needed 
	provision and I very much look forward to today's witnesses.  
	Thank you.
	Mr. Upton.  Thank you.  Mr. Shimkus?
	Mr. Shimkus.  Thank you, Mr. Chairman.  I am going to be 
	real short.  One is, I am going to use every public 
	opportunity to remind people so they can talk to their 
	parents and grandparents there are 46 days left for 
	Medicare D signup so all you out there, all you smart people 
	that can use the Internet, go to your grandmas and grandpas 
	and your moms and dads, and if they are not signed up, get 
	them engaged.
	Second thing, the draft is good.  I really can give the rest 
	of my opening statement based upon what Eliot Engel said.  
	The VOIP, the access to database, is a great part of the 
	bill, and I appreciate that effort.  I, as Members do, am 
	struggling with this whole debate on net neutrality. Is the 
	bill too hot, is the bill too cold?  Can't we find something 
	that is just right, and hopefully in this process we can do 
	that.  I yield back.
	Mr. Upton.  Mr. Stupak.
	Mr. Stupak.  Mr. Chairman, I will waive and save my three 
	minutes for later.  Thank you.
	Mr. Upton.  Mr. Pallone.
	Mr. Pallone.  Thank you, Mr. Chairman.  I want to thank all 
	of our witnesses for coming here today to discuss critical 
	telecommunications issues and particularly mention the 
	presence of Jeffrey Citron from Vonage, who both lives and 
	has his headquarters in my home county of Monmouth, 
	New Jersey.
	I have long been a proponent of ensuring consumer choice and 
	greater competition and I hope that this hearing will help 
	us craft legislation that strikes a good balance between the 
	two.  It is long past time for us to update the Telecom 
	Reform Act passed in 1996, and if done properly, our efforts 
	could reduce rates for video content consumers.  While the 
	proposed legislation provides a good vehicle, there still 
	remain many questions on how best to provide consumers 
	competition in the video marketplace and I am interested 
	in hearing the panel's views on how to ensure aggressive 
	deployment measures in low-income and rural areas.
	There are also many questions about how and to what extent 
	the Internet should be regulated.  I look forward to hearing 
	how the witnesses feel about the net neutrality language 
	included in the current legislation.  I would also like to 
	hear what we can do to ensure there is no blocking, slowing 
	down, or impeding of Internet traffic by content providers.
	Telecommunications reform also brings up the issue of E-911.  
	It is safe to say that all customers deserve access to 
	life-saving E-911 networks and that is why guardians of the 
	E-911 network or facilities should do all that they can to 
	ensure that new services like voice over IP, have all the 
	tools they need to provide consumers with enhanced emergency 
	protections.  I look forward to hearing why there are parts 
	of the country taking longer to roll out access to E-911 
	service by voice over IP providers.  Is this caused by 
	technological hurdles or manmade obstacles?
	Crafting appropriate legislation is a delicate process.  We 
	must balance the interests of local and State governments 
	with the needs of business and fair competition and 
	obviously achieving that goal is easier said than done.  
	However, the one thing that we need to keep in mind is how 
	Congress can best help all of these content providers and 
	continue to expand services for the American consumer at a 
	competitive price.  Again, I thank all of you for coming in 
	to talk about these issues with us.  Obviously it is crucial.  
	Thank you, Mr. Chairman.
	Mr. Upton.  Mr. Bass.
	Mr. Bass.  Thank you very much, Mr. Chairman, and I want to 
	thank you for holding this hearing.  I think it is going to 
	be informative and helpful.  It is another step in what has 
	been a long and I think fruitful debate, and I have been 
	trying to think of a way to discuss this thin measure before 
	us.  I don't think there is anything wrong with thin 
	measures.  They are just as good as fat measures, in my 
	opinion, and I have really had a mission throughout this 
	debate that as we approach telecommunications, we want to 
	create a system that encourages competition, lower prices, 
	and better service.  Tat more access to services in 
	communities will lead to more innovative services and 
	better services, which will lead to better competition, 
	lower prices, and more attention to customers.
	It always surprises me that in my hometown, I pay about 
	$150 a month for high-speed Internet access, for television, 
	and for telephone.  That is more than n probably most of all 
	of developed countries around the world, maybe some Third 
	World nations, frankly, and I don't think that is right.  
	I would like to see the efforts of our debate and our 
	legislative work create an environment in which a town in 
	my district, like Washington, can compete with a city like 
	Washington, or the city of Berlin way up in the middle of 
	Coos County, can compete with Berlin, Germany.  That should 
	be the objective, and I believe the bill does move 
	significantly in this direction, firstly by including the 
	municipal broadband provisions, which I was pleased to work 
	with my friend from Virginia on, and I recognize that 
	municipal networks are not always going to be the right 
	solution, but it is an option that ought to be preserved.  
	I think the national franchise is a good idea but we ought 
	to also consider giving the States the ability to have a 
	franchise.  We have States now that are doing it and doing 
	it successfully, and what is good in one part of the 
	country, what may be the priority in New Hampshire or Maine 
	or Vermont or Indiana or any other State, Tennessee, might 
	be different from what it might be in a more urban State 
	like New Jersey or frankly Michigan.  So having national 
	franchise with a State option I think really addresses 
	many of the issues that will lead to more access for 
	people in different parts of the country.
	The last issue which I would like to see debated is the 
	issue of programming.  We really need more information 
	about how these retransmission contracts are constructed 
	and how the process of bundling and tying together programs 
	affects the ability of the distributors, especially if they 
	are not big distributors, to provide new services and to 
	provide the same breadth of services that may be provided 
	in other areas.  Again, I remind my friends that the 
	objective here is to make sure that all the newest and most 
	interesting products are available everywhere, not just in 
	some places, that prices are competitive across the United 
	States and that we have good services and we can compete 
	over the Internet, understanding that the Internet and 
	telecommunications is the new form of transportation, 
	global transportation, and so with that, Mr. Chairman, 
	I will submit my written statement for the record and 
	thank you for holding this hearing.
	[The prepared statement of Hon. Charles F. Bass follows:]

Prepared Statement of the Hon. Charles F. Bass, A Representative 
in Congress from the State of New Hampshire

Before I begin, Mr. Chairman, I hope you know how appreciative I 
am--and I think many of us are--that we are having this additional 
opportunity to ask questions of these witnesses.  This committee 
draft starts from a position of being vastly improved over previous 
versions and I am grateful for all the work put into the changes. 
Mr. Chairman,
First, I am especially pleased that the section on municipal 
broadband networks is retained, and I appreciate the Committee's 
willingness to work with me and Congressman Boucher on this 
throughout the process.  Although I recognize that municipal 
networks will not be a good solution for most communities, their 
options must be preserved.  
In case there is any future judicial confusion on this point, we 
mean to allow cities and towns to build, promote, organize, 
operate, contract for, and in any other manner be involved in 
broadband network development and service provision.   I hope 
that is clear enough. 
Next, I am especially pleased that the franchise proposal has 
been significantly improved.  Competition between service 
providers will lead to lower prices, better customer service, 
and more innovative products and content choices.  Although 
legally exclusive video franchise contracts are a thing of the
past and most consumers have satellite choices available today, 
we know that head to head video competition between wired 
providers will be good for America, and I hope especially good 
for rural places in New Hampshire and elsewhere.
I do, however, think we can leave more of the franchising 
decisions outside of the beltway.  I completely agree that 
35 thousand communities would be too many to negotiate with--
even though cable did it--if we are seeking to rapidly bring 
direct competition.  
Over the past year, several states have taken aggressive action 
to address the lack of choices.  Perhaps this Committee's 
consideration of nationalizing what had been a local prerogative 
has helped spur this activity--and for that Mr. Chairman you 
should applauded.  Texas, Virginia, and Indiana have now enacted 
state-based franchise laws.  Service providers have as a backstop 
a one-stop approval process that can be used to enter communities 
in these states.  9 other states have now begun considering 
similar legislation, and a few have operated that way for a 
longer period of time.
I think a federal franchise is a fine idea to get us started in 
the debate and maybe even a way to jump start competition, but I 
think it is worth considering that we provide the states further 
chance to experiment and develop unique franchises for their 
residents.  This is something I am exploring and working on for 
when we begin active debate on this bill, and I'd like to ask a 
few related questions later today on this.
Finally, I think this debate must include programming issues and 
consideration of the manner in which the current system limits 
content choices that are available to consumers.  We did not 
consider these problems during debate on the satellite 
reauthorization or DTV bills.  I think that time has arrived.
During the satellite reauthorization debate, my highest priority 
was to ensure that my state's only network affiliate, WMUR in 
Manchester, could be accessed by residents of the entire state.  
The people in my four northernmost counties certainly consider 
themselves Granite Staters and not Mainers or Vermonters.  Arcane 
and thoroughly obsolete DMA rules had prevented that access 
previously, and this Committee was good enough to accommodate our 
unique situation.  
But the story did not end at the bill's enactment; a retransmission 
agreement still had to be reached before anyone could gain this 
new access.  People who watch government policy making closely 
sometime compare it to sausage making.  If that is true, then 
observing and being part of a retransmission agreement is like the 
process that begins the moment that sausage is consumed by a person.  
Getting chewed up is only the beginning, and frankly the most 
pleasant part.
We clearly must protect private property rights and we should not 
inject ourselves needlessly into market-driven negotiations.  However, 
the DMA rules I already mentioned, network non-duplication rules, 
affiliate area exclusivity, program bundling, non-network owned 
affiliate agreement clauses, vertical programming ownership, and a 
host of other market-power creating factors have already conspired 
to tip the scale of market balance in one direction or another.  
Although one might be able to argue that in aggregate the imbalances 
level out, it does nothing to help consumers in one area who have 
artificial restraints on their choices if consumers in another area 
are poorly served by some other restraint.
I find it hypocritical on its face that alternate distribution 
methods, such as direct episode-by-episode Internet downloads of the 
kind that forced the recording industry to turn its business model 
upside-down, can be offered by programmers who at the same time rail 
against changes to a distribution model that forces bundled services 
cloaked in seemingly false concern for localism and the independent 
broadcasters.
Members of this Committee time and time again have asked for 
information about programming costs and conditions only to be told 
that confidentiality clauses prohibit any disclosure.   Yet, all 
sides come back later to claim that they are being held hostage, 
abused, tortured, and raped and pillaged by the other side.  
I say prove it.  Show us.  I think it is time we had some disclosure 
of these terms and conditions.  Certainly information on any 
programming tied or leveraged to the use of the publicly provided 
airwaves isn't too much to ask.

	Mr. Upton.  Mr. Doyle.
	Mr. Doyle.  Good morning, and thank you, Mr. Chairman, for 
	scheduling today's proceedings.  Pittsburgh is increasingly 
	becoming a center of high-tech businesses and jobs.  However, 
	my district also has one of the highest concentrations of 
	senior citizens in America, the majority of which live on 
	fixed incomes.  A vibrant telecommunications industry is of 
	vital importance to my district.  I look forward to seeing 
	consumers have competition for telephone, television, 
	Internet, wireless, and more.  All Pittsburghers will benefit 
	from increased competition so long as they all have access 
	to competition and so long as their only options aren't 
	pricey packages of services that are bundled with a new 
	kitchen sink.  Franchises with local governments can ensure 
	all that and more, but it remains to be seen whether the 
	national franchises in this committee print will offer the 
	same level of protection and availability.
	As I began my service on this subcommittee, we discussed 
	whether and how dozens of companies would provide telephone 
	and DSL service.  Now we are talking about whether and how 
	to facilitate a mere two or three choices for television, 
	phone calls, and the Internet.  Currently, the United States 
	is 16th in the world in the percentage of people with 
	high-speed Internet at home.  This is simply not acceptable 
	if we want to be able to employ the millions of workers 
	that we have told to get retained with technology skills, 
	and it is not acceptable if we want our kids to have a 
	future as bright as they deserve it to be.
	I am sitting here with an open mind.  I look forward to 
	hearing from each of the witnesses and I hope they address 
	how they think this bill can promote competition, lower 
	prices, and improved service for every American.  Thank you, 
	Mr. Chairman, for holding, this hearing and I yield back the 
	balance of my time for questions.
	Mr. Upton.  Thank you, Mr. Doyle.  I would just announce to 
	Members that we are expecting one vote at 11:00.  Mr. Bass, 
	the Vice Chair, is going to go and vote early and come back 
	so we can continue the queue that we have towards the Members' 
	opening statements.  We are going to want to run through 
	this vote so that we can continue and try to adjourn before 
	early evening.  Mr. Ferguson.
	Mr. Ferguson.  Thank you, Mr. Chairman.  Thank you for 
	holding this hearing and listening to Members' views 
	concerning the best way to promote more competition in the 
	marketplace and choice for our constituents.
	I have been guided by two principles as we have gone through 
	this whole process.  One, what is the best way to service 
	consumers today in terms of competition that will bring 
	prices down.  And number two, what is the best way to serve 
	consumers in the long term, in terms of how we can encourage 
	investment of capital and infrastructure and in new 
	technology.  It is for those reasons that I support the 
	video choice provisions of this bill.
	When we look at the provisions of this legislation and any 
	potential amendments, we have to make sure that the 
	provisions meet the overall goals that we are trying to 
	achieve.  The goal of this legislation should be more 
	consumer video choice, more broadband deployment and not 
	unwanted regulation of the Internet.  The success of the 
	Internet was built on its freedom from regulation and we 
	should make a very strong effort to keep it that way.  
	I would also like to commend the authors of the bill for 
	making it a priority to ensure that all providers of 
	video services are able to compete on a level playing 
	field.  Our goal should be to treat like services alike 
	and to make sure that one competitor is not saddled with 
	and disadvantaged by government regulations while another 
	is free from those burdens.  This bill I believe moves us 
	in that direction.
	I am also pleased to see that the VOIP E-911 issue is 
	addressed.  In the post-Katrina world, the issue of E-911 
	and redundancy in our communications network has become 
	quite literally a matter of national security.  During 
	Hurricane Katrina, the mayor of New Orleans was able to set 
	up a call center using the Vonage service of one of his 
	aides, his first outside contact, allowing him to coordinate 
	with President Bush and state and local authorities during 
	a time of real emergency.  This VOIP connection provided 
	the redundancy in the network that served as a communications 
	hub for an entire city at a critical time.  This is a 
	success story that demonstrates what happens when our 
	regulatory regime encourages innovation and competition.  In 
	such an environment, new technologies are created and 
	deployed to the benefit of consumers, often with substantial 
	cost savings.  Customers need access to life-saving E-911 
	networks regardless of which technology they use.  That is 
	why we need to ensure that new services like VOIP have all 
	the tools they need to provide consumers with the enhanced 
	protections that they deserve.
	I want to congratulate Chairman Barton, Chairman Upton, 
	Mr. Pickering, and Mr. Rush for crafting a bipartisan piece 
	of legislation that promotes fair and effective competition 
	for our constituents while promoting this committee's 
	commitment to reducing regulation in the marketplace.  I look 
	forward to hearing our witnesses today, and I thank you, 
	Mr. Chairman.  I yield back.
	Mr. Upton.  Mr. Inslee.
	Mr. Inslee.  Thank you.  It is true that the hottest places 
	in Hell are reserved for those who preserve their neutrality 
	but it is also true that the warmest seats in Heaven are 
	reserved for those who want to preserve net neutrality, and 
	the reason is, is that net neutrality will preserve the 
	utility and the tremendous liberty of innovation that have 
	made the Internet really the greatest tool for intellectual 
	improvement and dynamic force since the invention of the 
	printing press.  And I am very concerned that the bill as 
	currently drafted will allow an arteriosclerosis to develop 
	in this circulatory system.  This marvelous tool that has 
	developed that has been freely available without the private 
	taxes that Mr. Dingell alluded to, and while arteriosclerosis 
	is a disease of the old in humans, it is a disease of the 
	young and the Internet.  Because when we start to impose 
	these private taxes, the ones who get hurt are the young 
	innovators, the garage innovators, the small business 
	innovators, those who have not achieved the great success 
	of the Googles of the world and it is for those young 
	innovators that I think our committee ought to take a look 
	at this bill and really make a firm statement to preserve 
	net neutrality just not in wishes but in reality.  And I am 
	very concerned that the horse will be out of the barn if 
	we do not act.  Shots across the bow of net neutrality have 
	already been fired in the press and we should not be in a 
	position to say that we don't think the levees are going to 
	be topped.  They are going to be topped here if this 
	committee does not act and so I am hopeful that we can work 
	together in a bipartisan way to give strength to a net 
	neutrality provision that will protect those innovators all 
	across the world and really make the Internet what it 
	deserves to be, which is the most utilitarian thing we have 
	ever come up with.  Thank you.
	Mr. Upton.  Mr. Stearns.
	Mr. Stearns.  Thank you, Mr. Chairman.  Let me commend you 
	and the others for your long effort here in negotiation.  I 
	think after listening to Mr. Dingell, I think perhaps you 
	should realize much like other markups around here, we get 
	through the subcommittee markup, then we go to full 
	committee and there are some changes done, and then it goes 
	to the House and there are more changes, so oftentimes it 
	is better to keep plodding forward and realize that the 
	perfect is the enemy of the good here because in every 
	instance when you talk about this bill, it comes down to 
	perhaps three areas, the concern about build-out 
	requirements and obviously there is language in is this 
	bill that talks about how you can't discriminate, and I 
	have the language in front of me.  The other concern is 
	the uniform rate requirement and, you know, really we as 
	Republicans particularly are concerned about putting any 
	regulation in there and let the competition decide.  And 
	the third area is net neutrality that was just recently 
	mentioned.  There is language I am looking for right in 
	title II talking about enforcement of the FCC's broadband 
	policy dealing with net neutrality, so Mr. Upton and 
	Mr. Barton have put language in there.  So it is just a 
	case of whether you think it is strong enough, and I 
	think the best way to handle this is, after this hearing, 
	I urge my colleagues to mark the bill up.  There won't 
	be complete agreement, but then we will be able to find 
	and put something in the sand that says this is what we 
	think is the best possibility, and then move from there 
	to the full committee and have another markup where we 
	can have amendments and discuss it and work it out.
	I was involved with the write-up of the 1996 Telecom Act, 
	and back then there possibly were about 37 million people 
	that were online shortly after the bill was passed.  
	Today we have 220 million Americans that are online so 
	it has moved tremendously forward, and I think when you 
	go with a bill this complex, it has a huge impact.  We 
	can see from the audience here, it is standing room only.  
	There are people out in the hallway.  This has huge 
	financial impacts and I appreciate that any of the 
	executives and the lobbyists that are involved here are 
	worried about their clients, and I would say to ease 
	their concern, is this process we had in the 1996 Telecom 
	Act was the same way and we just moved forward.  And so 
	I urge my colleagues to hopefully mark this bill up 
	shortly out of this subcommittee, Mr. Chairman, and move 
	it to the full committee.
	An area that I have concern about, even in the Telecom 
	Act, was this interconnection.  Obviously once these pipes 
	are made open and the companies have them, they own them.  
	The question is, should other people have the right to 
	offer voice, video, and data applications over these and 
	how do you work out that interconnection, and I think 
	current law provides for rights and obligations for 
	interconnection, but I am pleased that the draft attempts 
	to include those rights going forward for VOIP providers 
	given the recent FCC decision sand the ongoing debate 
	concerning what constitutes an information service or 
	telecom.  I want to ensure that all parties have an 
	opportunity to compete, and I want to also--my colleague, 
	Mr. Boucher, has pointed out, both he and I have a bill 
	that we thought should be part of this markup.  So I 
	thank you, Mr. Chairman.
	Mr. Upton.  Mr. Rush, co-author of the bill.
	Mr. Rush.  Thank you, Mr. Chairman.  Mr. Chairman, I want 
	to thank both you and Ranking Member Markey for conducting 
	this very important hearing to allow for a full and fair 
	and open discussion involving the legislation that I am 
	sponsoring with Chairman Barton, yourself and Vice 
	Chairman Pickering.  I also would like to thank our 
	distinguished panel of witnesses for taking the time out 
	to share with us their insights on this legislation.
	Mr. Chairman, this bill represents a huge step in 
	bringing lower prices, more choices, and better services 
	not only to my hard-pressed constituents, but to the 
	entire nation.  Specifically, this bill would provide 
	equitable competition among a variety of video service 
	providers.  Video service providers can compete in 
	price, quality, and quantity, and consumers can finally 
	decide which service provider they prefer.
	In that respect, I want to ensure that my community, 
	the African-American community, is better served.  As 
	you know, African-Americans watch more television; 
	spend billions of dollars on television service, more 
	than any other demographic group or ethnic group in 
	the entire nation.  Mr. Chairman, their concerns must 
	be addressed.  Specifically, this bill will create a 
	nationwide approval process for pay TV services.  By 
	streamlining the system, these companies will be able 
	to offer new television services in many areas while 
	protecting local interests.  Cable providers will be 
	able to participate in the streamlined system once they 
	face local competition.  This bill would also prohibit 
	discrimination on the basis of income and give the FCC 
	the power to revoke the provider's franchise area if 
	there is willful or repeated violation of discrimination.  
	This bill will require video service providers to provide 
	access to leased channels to qualified minority owners.  
	This bill would also require Internet-based telephone 
	services to offer 911 capabilities while ensuring 
	Internet telephone providers that they have all the 
	access to the necessary 911 infrastructure and technology 
	that is available.  This bill would clarify the FCC 
	authority to prevent Internet service providers from 
	blocking or degrading any content or application delivered 
	over the public Internet.  This bill would also preserve 
	municipalities' rights to collect up to five percent from 
	any pay TV provider, would allow cities and towns to 
	develop their own broadband networks, which they are 
	struggling and striving and most desirous of.
	Mr. Chairman, there has been and will continue to be 
	different opinions about this bill, and I urge this 
	subcommittee and the full committee to move forward 
	expeditiously with the markup, and I will also encourage 
	my colleagues to stay focused on the central objective 
	of this legislation which is to give those same consumers 
	a more diversified voice in video.  In 2003, the General 
	Accounting Office found that cities with more than one 
	cable provider enjoyed 15 percent lower rates than in 
	cities with a single provider.
	This legislation represents a huge step in helping our 
	American consumer.  It creates a fair and equitable 
	marketplace that should allow competing companies to 
	thrive and invest, and hopefully provide more jobs in the 
	service areas and also across the nation.  Mr. Chairman, 
	thank you, and I yield back the balance of my time.
	Mr. Upton.  Thank you.  Mr. Terry?  Mr. Pickering.
	Mr. Pickering.  Mr. Chairman, thank you, and I want to 
	commend you and Chairman Barton for your work on this 
	effort.  I want to thank Mr. Markey and Mr. Dingell for the 
	good-faith efforts that we engaged in in the best tradition 
	of this committee in trying to reach an agreement, a 
	bipartisan agreement on telecommunications.  As we all know 
	on this committee, it is our tradition to have a bipartisan 
	approach on telecommunications and I still believe and hope 
	that we can reach that, and I think you will see on both 
	sides of the aisle as we move forward that there will be 
	bipartisan support.
	I would like to take a moment to put into context our effort 
	in the legislation that is before us as we move forward.  
	Understanding history gives us good insight into the present 
	and into the future.  If you look at the beginning of the 
	discovery, Alexander Graham Bell's, he started the telephone 
	and at that time you had AT&T start, you had many independent 
	providers of telecommunications service but you had no 
	interconnection policy.  And because of no interconnection 
	policy, you had multiple networks that could not operate, 
	function, or talk to one another.  As a result, in 1934 the 
	natural monopoly theory was adopted by Congress and that 
	existed up until the breakup of AT&T in 1984.  One of the 
	great legacies of Ronald Reagan was the collapse of the Iron 
	Curtain and the freedom that came through that across Eastern 
	Europe and the former Soviet Union.  One thing that is not 
	often mentioned with the Reagan legacy is the breakup of 
	AT&T, which changed and started the process that we are still 
	working on today, and that is to bring competition to 
	telecommunications.
	It is extremely significant that we get this right, and the 
	reason is because the gains of our economy, the efficiency, 
	the productivity that has really driven the last decade and 
	a half of growth, really the last decade of growth, has come 
	through the telecommunications sector.  One of the most 
	significant things, probably the best thing we did in the 
	1996 Act that no one disputes, which is a rare thing, is 
	the removal of barriers to entry.  We are continuing that 
	today, and we also did in the 1996 Act is that we made sure 
	that we preempted the States and local communities from 
	blocking competitors in voice, and we set up a path to try 
	to bring not only long distance competition enhanced but 
	local voice competition.  We hoped at that time that cable 
	and telephone companies, facility-based providers as well 
	as CLECs and others would then have a vibrant competitive 
	opportunity.  The reality is, ten years later we are just 
	now beginning to see it, and this bill we hope will stimulate 
	what we had hoped ten years ago and that would be that cable 
	and telephone companies would actually compete against each 
	other.  Today we are seeing among our cable companies their 
	emergence as voice over Internet providers and offering a 
	bundle of services, both voice and video.  What we did in 
	this bill and the best thing that I believe we do in this 
	bill, is that we complete what was started in 1996 and that 
	we now bring all telecommunications policy to the Federal 
	level.  When you are now talking about IP applications, it 
	does not make sense to have a patchwork of thousands of 
	localities in 50 States regulating video in a different way.  
	This gives both for cable companies and for telephone 
	companies national franchises and it significantly advances 
	a Federal policy and will advance competition in the video 
	marketplace.  But equally important is that we maximize 
	competition in the voice marketplace and we should not lose 
	sight of that goal.  Right now after ten years the local 
	incumbent telephone companies, the Bell companies control 
	about 95 percent of the local voice market.  In the cable 
	video market, you have 30 percent penetration through 
	satellite, so in many ways the video market is more 
	competitive than the voice market.  This bill through 
	interconnection cable directly to local telephone companies 
	will help expedite, enhance, and promote voice competition, 
	and I want to make sure, Mr. Chairman, that I work with you 
	to make the commitment and to assure that the language that 
	we now have in the bill achieves that objective of getting 
	competitive parity to voice over Internet providers so that 
	they can enter the voice market and compete effectively with 
	the local telephone companies just as we remove barriers to 
	entry in the video marketplace there should be parity.  I 
	want to make sure as we move forward today that we get net 
	neutrality right.  It is very critical that we have not only 
	two choices, but we have and maintain hundreds of choices 
	for consumers.  But this is a good start.  It is a good 
	framework and I am very pleased to join Chairman Barton and 
	Mr. Upton and Congressman Rush as we start this process of 
	great significance, and I hope that at the end of the process 
	that we can say on our side of the aisle that we have 
	promoted and continue the Reagan legacy of more competition 
	and free market competition for every sector, every market, 
	and that we have maximized that intent.  Thank you very much.
	Mr. Upton.  Mr. Gonzalez.
	Mr. Gonzalez.  Thank you very much, Mr. Chairman.  I am going 
	to be brief.  I always believe there are certain topics or 
	issues that this committee takes up at hearings.  I think 
	opening statements should really be opening prayers and so I 
	will do my best, and I wrote something quickly.  It will only 
	take me a second, and that is, I hope this committee will 
	guard against views and even biases formed in years past in 
	the technological world that no longer exists, that we will 
	view our concerns through the clear lens that reflects new 
	technology, its impact on markets, yet that we will be guided 
	by the enduring principles of fairness, robust competitiveness,
	and sound economic policies.  Amen.  I yield back.
	Mr. Upton.  Ms. Blackburn.
	Mrs. Blackburn.  Thank you, Mr. Chairman.  I want to thank you 
	and Chairman Barton for all the work that you have put into 
	producing this bill and working to reform our franchising laws 
	and for holding this hearing today, and I am pleased to see, 
	and I know that my constituents are pleased to see, that this 
	bill incorporates some of the key concepts of the bill that I 
	have worked on with Representative Wynn, the Video Choice Act.
	This bill--and I tell you, Mr. Boucher and Mr. Bass were 
	complaining about it being thin.  I think thin bills are very 
	good.  Thin is a good thing.  If we get less government 
	regulating and got out of the way, innovation and job creation 
	could take place.  But it makes it clear that we must change 
	video franchising.  We must change the process because it does 
	stifle competition and innovation.  We have great panels 
	today. We appreciate you all being here.  I am looking 
	forward to talking with you, and wish I could have all my 
	time for questioning and everybody else's time.  But the 
	facts are clear that we do have to cut red tape and 
	regulations and promote competition.  The price consumers pay 
	for long distance in their wireless minutes has gone down 
	consistently in the last ten years, and at the same time 
	cable costs have gone up 86 percent.  That is four times the 
	rate of the consumer price index.  That has to be addressed.  
	And we know that it is no surprise that the FCC has found 
	that only 1.5 percent of the markets have head-to-head 
	competition for cable services.  Right now video choice is 
	limited to a cable provider, satellite, rabbit ears, and 
	Congress does need to take action on this bill.  We know 
	competition brings lower prices.  You can look at the Keller 
	Texas example, $37 a month, and almost overnight Chartered 
	Communication cut the price in half.
	Finally, I think it is important to note that this is not 
	just about choices in video service, it is also about 
	broadband.  Chairman Barton mentioned that cutting the 
	regulations that prevent the companies from entering the 
	video market will help with both our broadband deployment 
	and our broadband penetration here in the U.S., and as the 
	Chairman said, we are now at 16th.  That is not acceptable.  
	And I just that just like the bill that Representative Wynn 
	and I had co-authored, that this will improve that standing, 
	so we look forward to having you with us and hearing from 
	you, and Mr. Chairman, I yield back.
	[The prepared statement of Hon. Marsha Blackburn follows:]

Prepared Statement of the Hon. Marsha Blackburn, A Representative in 
Congress from the State of Tennessee

Chairman Upton and Chairman Barton I want to thank you for your work 
in producing this bill to reform our franchising laws and for holding 
this hearing today.  I am pleased to see, and I know all our 
constituents will be pleased to see that this bill incorporates key 
concepts of the bill that I have been working on with Rep. Wynn, the 
Video Choice Act.  
Our bill, and now the committee's bill, makes it clear that we must 
change the video franchising process that currently stifles both 
innovation and competition. We have two good panels today, but the 
facts are clear -- cutting red tape and regulations to promote 
competition helps consumers.                                          
The price consumers pay for long distance or wireless minutes has 
gone down significantly in the last ten years, but the price they 
pay for cable has gone up 86% over that same period -- that is four 
times the rate of the Consumer Price Index.  Why is this?  Well it 
should be no surprise that the FCC has found that only 1.5% of 
markets have head-to-head competition for cable services.   Right 
now video choice is limited to a cable provider, satellite service, 
or rabbit ears.  Congress needs to act on this bill.  We know 
competition lowers prices.  Right now Verizon is offering its video 
package for about $37 dollarsa monthin Keller, TX. Almost 
overnight Charter Communications cut its price in half to compete. 
Finally, it is important to note that this is not only about choices 
in video service. The pipes that deliver this video product will 
also have more space for data -- and cutting the regulations that 
prevent these companies from entering in the video market will only 
help broadband penetration in the US.The United States has fallen 
to 16th in the world in broadband penetration and I believe that 
like the bill I authored with Rep. Wynn, the chairman's bill will 
improve this standing.
The message is simple. Reducing the barriers to video competition 
is good for consumers. I want to commend you Mr. Chairman for your 
work and I look forward to the testimony.

	Mr. Upton.  Ms. Cubin.
	Ms. Cubin.  Thank you, Mr. Chairman.  I do believe in the 
	promise of Internet protocol technology and how it can 
	improve and enrich American consumers, but I want to ensure 
	mostly that any legislation that we consider does not harm 
	those businesses who have made it their business, if you 
	will, to serve the most remote subscribers in the country 
	with telecommunications services.  I represent the most 
	rural state in America and we don't even have cell phone 
	service in many, many places in our state.  So I really 
	want to protect the businesses who have made investments 
	in rural America, but I also want to protect issues like 
	access to content, preservation of the universal service 
	fund, and the freedom to access the Internet in an 
	unfettered manner, so those will be my guide in this 
	deliberation.  Thank you, Mr. Chairman.
	[The prepared statement of Hon. Barbara Cubin follows:]

Prepared Statement of the Hon. Barbara  Cubin, A Representative in 
Congress from the State of Wyoming

Thank you, Mr. Chairman.
I want to thank you and those who have spent hours, weeks and 
months in negotiations to craft this bipartisan bill.  We've come 
a long way from the start of this Congress when the idea of a 
national video franchise was first proposed, to the bill we are 
deliberating today.  Thanks to the promise of Internet Protocol 
(IP)-enabled services and the deployment of fiber-optic 
infrastructure, however, we now find ourselves debating the novel 
concept of our constituents being able to receive video over 
their phone lines.    

It wasn't too long ago when everyone was using dial-up connections 
to access the Internet and the concept of broadband in one's home 
seemed prohibitively expensive and remote.  Fast forward 10 years--
as the Internet has become mainstream and commercialized--and 
many consumers now have a choice of broadband providers.  While 
we still have a ways to go before this benefit truly affects all 
of those in Wyoming's most rural communities, progress is being 
made.  As a result of this broadband deployment, we are seeing 
intermodal competition and other new innovations no one could have 
foreseen.  This is really to the benefit of consumers across 
America.
I believe in the promise of IP technology and how it can improve 
the rich selection of competitive services for consumers.  I also 
want to ensure that any legislation we consider does not harm 
those who have made it their business to serve the most remote 
subscribers with advanced telecom services.  Issues like access 
to content, preservation of the Universal Service Fund and the 
freedom to access the Internet in an unfettered manner will guide 
me as we proceed on this bill.
 	I look forward to hearing from both of our distinguished 
 	panels on this draft today and want to continue our dialog 
 	as we tackle legislation modernizing the telecommunications 
 	laws.
  	I yield back the balance of my time.

	Mr. Upton.  Thank you.  Ms. Solis.
	Ms. Solis.  Thank you, Mr. Chairman.  I want to thank you 
	for the opportunity to give an opening statement.  As a 
	member of the full committee, I have been following this 
	issue very closely.  Prior to my election to Congress, I 
	served in the California State Senate on the Utilities and 
	Commerce Committee and worked back then in 1996 on the 
	Telecommunications Act.  While the world of 
	telecommunications has changed dramatically since then, some 
	issues such as the digital divide and redlining remain a 
	challenge to many in our low-income communities, the 
	community that I represent in Los Angeles.  That is why I 
	strongly support inclusion of strong enforceable 
	anti-discriminatory language in the committee bill.  
	Non-discrimination in telecommunications is critical to 
	bridging the digital divide, particularly in communities of 
	color, especially the Hispanic community.  While Latinos 
	are the fastest growing demographic of online users, only 
	one in eight Latino households has access to broadband 
	services.  Indeed, any reform must ensure that Latino 
	communities get access to the latest broadband technologies 
	as quickly as non-Latino communities.  In fact, 11 members 
	of the Congressional Hispanic Caucus and numerous civil 
	rights organizations, consumer groups, and advocacy groups 
	support strong enforceable anti-discrimination language in 
	the video franchising agreements.  Included in that is the 
	leadership conference of the civil rights letters that we 
	have received, the League of United Latin American Citizens, 
	the National Hispanic Bar Association, the National Hispanic 
	Caucus of State Legislators, the National Puerto Rican 
	Coalition and the Hispanic Federation.  I ask for unanimous 
	consent to enter these letters from these groups into the 
	record.
	To be truly effective, any non-discriminatory broadband 
	deployment provision adopted by this committee should 
	carefully and specifically look at a method of enforcement, 
	and some have suggested that the non-discrimination 
	provision only applies to community self-selected for access 
	to video services by new service providers.  But such a 
	policy, in my opinion, would actually encourage 
	discrimination.  Take, for instance, in Los Angeles.  If 
	such a policy would allow a video service provider to 
	provide service only to residents in Brentwood while 
	disenfranchising the rest of Los Angeles so long as a 
	provider didn't discriminate within the boundaries of 
	Brentwood, in effect video service providers could neglect 
	service to low-income areas and the other parts of 
	Los Angeles, for example, in the area I represent in East 
	Los Angeles as well as South Central Los Angeles.  I share 
	my colleagues' goals of passing legislation which will 
	promote increased competition, lower prices, improved 
	quality of service and the development of new advanced 
	services, but the digital divide remains a reality for my 
	constituents and many others.  We should not let this 
	opportunity pass.  And I am pleased to hear that the latest 
	draft put forward by Chairman Barton and others includes a 
	placemaker for anti-redlining enforcement.
	I look forward to working with my colleagues on that and 
	working out particular language that would hopefully phase 
	in with some strong enforcement language so this is done 
	over time.  I yield back the balance of my time.  Thank you.
	[The information follows:]


	Mr. Upton.  Thank you.  I would recognize Mr. Buyer, a very 
	active Member on this issue, and I might ask Mr. Buyer, since 
	I am the only one that hasn't voted on this, maybe if you 
	would assume the chair here.  You voted, right?  Did you vote 
	on this?  We have got about seven minutes to go so-- 
	Mr. Buyer.  I want to thank Howard here, because you have 
	gone through the gamut.  Last summer in Indiana I held two 
	telecommunications forums, you can call them, with industry 
	leaders last summer and last fall.  Through those meetings 
	we were able to come to agreement on principles which is 
	extremely important, which is really challenging to do.  Get 
	everyone in this room to agree to a set of principles.  
	Those principles are--whatever changes we made, we wanted to 
	ensure economic security, encourage investment.  We want to 
	open markets, be deregulatory, regulate on parity.  We want 
	to empower consumers and be technology neutral.  Those are 
	all the principles which individuals had agreed to.
	I then began the process of drafting legislation.  Chairman 
	Barton, Chairman Upton did not want me to do that at all.  
	Well, I was not a very happy camper.  I then met with 
	Governor Mitch Daniels, asked Governor Daniels, what are you 
	going to do about telecommunications reform, Mitch.  He said 
	well, Steve, what do you want it to look like.  Now, that is 
	an opportunity.  So I sat down with the Governor of Indiana.  
	I happen to have a State Senator who also works on my 
	Congressional staff.  That is a good thing, because Senator 
	Brandt Hershman then took that legislation and we even went 
	a step further, and in Indiana today on a bipartisan basis, 
	by overwhelming votes, we have the most sweeping 
	telecommunications reform in the country, and we completely 
	deregulated phone.  It is exciting.  So I am pleased about the 
	road that we have gone.  It has been challenging through BITS 
	I, BITS II, the third draft, now onto the fourth draft.  We 
	are still not there yet.  We are getting closer.  But there 
	are a couple words out there that get thrown around that I 
	don't think I completely understand.
	If I were to do an exercise and ask all of colleagues and 
	everyone here to write on a piece of paper what does net 
	neutrality mean, how many different definitions do you think 
	we are going to get?  A lot.  I love how people throw out 
	terms and use words but what do they mean?  Well, my concern 
	is right now with the present legislation and I have now 
	back from legislative counsel my own legislation and I am 
	going to hold on to it, but I am concerned about the use of 
	the term "cable services."  And I understand that for 
	drafting purposes, it is easier to use existing language in 
	the Communications Act, but I believe that the use of the 
	term -cable services- does not signify the new era of video 
	providers.  So this is more than just semantics.  I am also 
	concerned about the exclusion of satellite from any forward-
	looking video programming legislation.  I do not favor the 
	exclusion of satellite.  This should be called video 
	services and satellites should be included in this.  And 
	while the current structure might not support the 
	development of satellite into the local franchising regime, 
	we have an opportunity to create a new structure that treats 
	everyone alike.  I am also concerned that the existing 
	cable providers cannot obtain a national franchise for a 
	local franchise until a new entrant enters the marketplace.  
	I believe this is in direct opposition to treating like 
	services alike, and if we are going to support the creation 
	of this new structure, then it should embrace all providers 
	of all like services at the same time.  I am also concerned 
	about the definition of gross revenues.  I also have concern 
	about statewide franchises that are out there right now.  We 
	need to include in this bill grandfathering the choice of 
	States to either go with what they have got or opt in.
	With regard to municipal provisions of services, I have a 
	strong concern out there that some of these cities and towns 
	are getting into the business without realizing what they 
	are getting themselves in to, or how also that competitor is 
	going to respond and how then the taxpayer is left holding 
	the bag, and I have some strong concerns about that.  So 
	maybe if we can include something that has a right of first 
	refusal to an incumbent broadband video provider, perhaps 
	that should be included in the bill.
	I want to thank all of you for coming to provide your 
	testimony today, and you have got to love the legislative 
	process.  
	Mr. Buyer.  [Presiding]  With that, the committee will be in 
	recess temporarily for about six minutes.
	[Recess.]
	Mr. Upton.  Okay.  We are finished with the opening 
	statements.  Again, all Members will be able to put their 
	statements into the record. 
	[Additional statements submitted for the record follows:]

Prepared Statement of the Hon. Anna G. Eshoo, A Representative in 
Congress from the State of California

Mr. Chairman, I appreciate the work that you and your staff have 
put into this draft, but I'm disappointed that this bill fails to 
deal with several critical issues, particularly the need for 
strong--Network Neutrality--rules to protect consumers and preserve 
the open Internet.
I understand and I support efforts to create more competition in 
both the video and broadband markets.  We should applaud efforts by 
cable and others to provide alternatives to Bell telephone service, 
and we should do everything we can to encourage the Bell companies 
to build out their networks to compete against Cable TV.
But the end result of this new -IP-based- world can't be a newly 
reconstituted AT&T duking it out with the big cable companies.  In 
order to ensure vigorous competition and innovation we need to make 
sure that other entrants have a fighting chance.
And I think the legislation before us falls short.
Congress should provide appropriate rules and policies for new IP 
video offerings, and ensure that the Bell companies have the 
appropriate incentives and regulatory environment to enter into 
competition with cable.
But we shouldn't do this at any cost; Bell entry into video is not 
the ultimate goal, but rather a means to a much more important 
outcome.
The most important feature of the Internet and IP-based technology 
is the potential to provide any form of communication or content - 
voice, video, movies, music, messaging, etc. - over a single 
network.
This means that through a single Internet connection - regardless 
of who the access provider is - consumers and businesses should be 
able to receive almost any information, entertainment, or commercial 
content.
We have to ensure that the diversity of content and sources of 
information that we have on the Internet today does not get locked 
down as the Internet converges with the more traditional cable and 
telephone networks.
I'm concerned that the bill before us does not provide sufficient 
protections for this diversity and appropriate--Net Neutrality--
rules to prevent vertical integration of Internet access and 
content.  In fact, this legislation is worse than doing nothing - 
it prohibits the FCC from doing anything other than preventing 
complete blocking of unaffiliated content.
We all support the possibility of additional consumer choices and 
competition among broadband providers, but I believe that as we 
consider new regulatory -rules of the road- for broadband providers 
we should not enable them to stifle competition in the provision of 
Internet content, applications, and services.
For the foreseeable future, the cable and phone companies will 
serve as a -chokepoint- for Internet access for the vast majority 
of Americans, and I believe it's incumbent on this Committee and 
Congress to ensure that the non-discriminatory framework that has 
allowed both the Internet to thrive, and competition on the Web 
to flourish, is preserved.
Without meaningful, enforceable -Net Neutrality- rules, we will be 
enabling network operators to fundamentally change the open nature 
of the Internet, allowing them to become gatekeepers for Internet 
users' access to content.
The major telephone companies have made it clear that they intend 
to establish -toll roads- on the Information Superhighway, making 
premium service levels available only for their preferred content.
The Bell companies' plans for -tiering- of Internet service would 
fundamentally change the way the Internet has always operated - 
openly and without barriers to content.  There can be arguments 
about whether this system is fair or necessary, but it's difficult 
to dispute that this will fundamentally change the Internet and the 
experiences of Internet users.
I'm also very disappointed that the bill fails to institute any 
requirements for new video franchises to provide service throughout 
the franchise.
Without such obligations, and without local governments able to 
exercise any authority over these franchises, new video providers 
will almost certainly gravitate toward the most lucrative - and 
often the most wealthy - portions of the service area.  They will 
have no responsibility to expand service to all consumers, and local 
governments will be powerless to prevent the -cream skimming- that 
will likely follow.
This Committee must carefully consider these important issues, and 
I hope develop a more balanced and more reasonable approach.  There 
is too much at stake to get this wrong.

Prepared Statement of the Hon. Gene Green, A Representative in 
Congress from the State of Texas

Mr. Chairman, although I am not currently a member of this 
Subcommittee, as a former member, I want to thank you for allowing 
me to submit this statement in writing, to be included in the 
hearing record.
	America needs legislation to modernize our telecommunications 
	laws, and this draft proposal is an important first step. 
	This has been a long, on again, off again negotiating 
	process. I wish we were marching together now, and I hope 
	we will be soon in the near future.
	We all want competition, and the authors' deserve praise for 
	their hard work in that direction. Even though it is not a 
	fully bipartisan draft, it represents good policy in several 
	areas.
Most importantly, the bill will spur new competition into the video 
market nationwide, and it protects the ability of cities to offer 
wireless broadband in neighborhoods. It also applies 911 and E911 
requirements to VOIP service.
	I do however, have several concerns at this early stage, and 
	I hope we can work on these issues:
I am worried that low-income areas with cable service because of 
previous cable build-out requirements might lose cable service 
altogether in an era without these requirements for anyone. Perhaps 
we should guard against this with a "hold harmless" provision.

We also should spell out the standard for the anti-income 
discrimination provision for national franchises--what would be a 
violation and how would we enforce against potential violations. 
Uncertainly leads to litigation.  It feels like income discrimination 
if price cuts in high income areas with competition come only at the 
expense of price hikes in low income areas without competition.
Given the current digital divide between communities, is there 
something else proactive we can and should do to bring the benefit of 
competition to all types of communities that won't deter competition 
in the first place?
Franchise revenue in the City of Houston and nearby cities supports 
police and fire department budgets. I think we should know whether 
the new calculation of gross revenues will cause life-supporting 
local revenues do go up or down or stay the same.
It is extremely important for cities to maintain control over their 
rights-of-way for beneficial public purposes like road and sewer 
projects, and perhaps we need to strengthen that control in these
positive areas.
I am also curious whether a state can be a "local franchise 
authority" under the bill, and if that make sense for a state as 
large as Texas.  For thing, that would mean that the State PUC would 
be the only option for consumer protection for millions of people, 
rather than their localities.
Finally, in what could be the biggest question of all, we may need 
to update the definitions of the Title II of the Communications Act 
for "cable service" and "video programming" since new kinds of 
Internet video could soon allow cable, telecom, or any other company 
a loophole out of national franchises.  Under this bill, a company 
may be able install fiber in public rights of way in order to sell 
VOIP service, broadband Internet service, and video products and 
avoid this Act, creating a scenario with different regulatory 
regimes, just as the old 1996 Act did.
	I am confident that we can come to satisfactory 
	understandings on these and other issues going forwards and 
	end up with a strong bipartisan bill.  I would also note that 
	other controversial issues, such as wholesale changes to 
	retransmission consent rules, probably should be left off 
	this legislation, if we want it to move quickly.  
Mr. Chairman, thank you for allowing me to submit this statement.

Mr. Upton.  We are going to start on the first panel.  I think we 
will be okay with votes for a little while.  Members will be in 
and out, I am sure.  Your statements are made part of the record 
in their entirety.  I am going to try to limit your opening 
statements to no more than five minutes.  
	We are joined by the Honorable Ken Fellman, Esquire, Mayor 
	of Arvada, Colorado, on behalf of the National Association 
	of Telecommunications Officers and Advisors, the National 
	Association of Counties, the National League of Cities, and 
	the United States Conference of Mayors; Mr. Walter McCormick, 
	President and CEO of the United States Telecom Association; 
	Mr. Kyle McSlarrow, President and CEO of the National Cable 
	and Telecommunications Association; Mr. Tim Regan, Senior 
	Vice President, Global Government Affairs, Corning 
	Incorporated; Mr. Paul Misener, Vice President for Global 
	Public Policy of Amazon.com; Mr. David Keefe, CEO of Atlantic 
	Broadband; Mr. Jerry Fritz, Senior VP for Legal and Strategic 
	Affairs and General Counsel for Allbritton; and Mr. Jeffrey 
	Citron, who was originally going to be on the second panel 
	but because we have found his chair at the end, Chairman and 
	Chief Strategist of Vonage.  Mr. Fellman, we will start with 
	you.  Thank you.  Welcome to the subcommittee.

STATEMENTS OF HON. KENNETH FELLMAN, ESQ., MAYOR, ARVADA, COLORADO, 
ON BEHALF OF THE NATIONAL ASSOCIATION OF TELECOMMUNICATIONS OFFICERS 
AND ADVISORS, THE NATIONAL ASSOCIATION OF COUNTIES, THE NATIONAL 
LEAGUE OF CITIES, AND THE UNITED STATES CONFERENCE OF MAYORS; 
MR. WALTER MCCORMICK, PRESIDENT AND CHIEF EXECUTIVE OFFICER, UNITED 
STATES TELECOM ASSOCIATION; KYLE MCSLARROW, PRESIDENT AND CHIEF 
EXECUTIVE OFFICER, NATIONAL CABLE AND TELECOMMUNICATIONS ASSOCIATION; 
TIMOTHY REGAN, SENIOR VICE PRESIDENT, GLOBAL GOVERNMENT AFFAIRS, 
CORNING INC.; PAUL MISENER, VICE PRESIDENT FOR GLOBAL PUBLIC POLICY, 
AMAZON.COM; DAVID J. KEEFE, ON BEHALF OF THE AMERICAN CABLE 
ASSOCIATION, CHIEF EXECUTIVE OFFICER, ATLANTIC BROADBAND; 
JERRY FRITZ, SENIOR VICE PRESIDENT FOR LEGAL AND STRATEGIC AFFAIRS 
AND GENERAL COUNSEL, ALLBRITTON COMMUNICATIONS COMPANY, ON BEHALF 
OF THE NATIONAL ASSOCIATION OF BROADCASTERS; AND JEFFREY CITRON, 
CHAIRMAN AND CHIEF STRATEGIST, VONAGE

Mr. Fellman.  Mr. Chairman, distinguished members of the committee, 
I thank you for the opportunity to be here.  I am the mayor of 
Arvada, Colorado, and I appear before you today on behalf of 
organizations that represent elected and professional officials from 
nearly every municipal and county government in the United States.  
I commend you, Mr. Chairman, and your colleagues, Chairman Barton, 
Representatives Dingell, Markey, Pickering and Rush, who have 
worked diligently on these issues.  Unfortunately, we have had less 
than 72 hours to read, review and consider the full impact of this 
draft legislation.
	At the outset, we are concerned that as written this bill 
	nationalizes what is presently an effective Federal local 
	government partnership and it will likely result in 
	litigation.  The bill does respond favorably to some of the 
	issues that we have raised with you in the past.  However, 
	we also have significant concerns which we would like to 
	work with you to address.  In particular, we are very 
	concerned that the bill is unclear as to its applicability
	to IP television services.  Certainly this debate will 
	have been in vain if like services are not treated alike.  
	This issue needs to be addressed.  The bill appears to give 
	telephone companies substantial relief from local 
	franchising.  It does not, however, provide consumers with 
	the benefits that telephone companies have promised would 
	follow.  In particular, there are no assurances that more 
	homes, especially those in rural communities, will actually
	get competitive broadband.  Such assurances must be added 
	to the bill.
	We appreciate the efforts of the members to keep local
	government whole with respect to revenues and it appears 
	that the gross revenues definition would largely do that.  
	However, there appear to be unintended consequences in a 
	provision of the bill that would allow providers to deduct 
	from gross revenues the costs of bonding, indemnity and 
	even damages and penalties.  We trust that we can resolve 
	this matter with the committee.
	With respect to local public access, we hope that the 
	committee would consider allowing local government to 
	continue to receive the greater of one percent or the 
	per-subscriber equivalent that they receive today as was 
	done in Texas, and that way no local government will be 
	forced to terminate services that they are currently 
	providing.  We are pleased that the bill recognizes that 
	managing public rights-of-way is properly a function for 
	local government.  We hope you would agree that disputes 
	pertaining to that authority do not belong at the FCC, 
	but rather should be addressed in a local court, as is 
	the case today.  Similarly, we appreciate that the bill 
	recognizes the authority of local government to provide 
	services directly to our constituents.  We are concerned 
	that the bill does not provide subscribers with adequate 
	recourse for consumer complaints.  The FCC is not the 
	appropriate venue to set these standards or address 
	these complaints.  Local governments do not require new 
	video entrance to deploy to an entire community immediately. 
	Requiring that entire communities have access to service on 
	a realistic and equitable timetable, however, is not an 
	unreasonable barrier.  Guarding against economic redlining 
	and requiring that all neighborhoods in our community see 
	the benefit of competitive services is properly a function 
	of local government and is therefore best enforced at the 
	local level.  The proposed bill does not yet sufficiently 
	protect those interests.
	Mr. Chairman and members of the committee, local government 
	officials recognize the value that competition brings to 
	local residents and we have actively sought it.  Contrary 
	to what many have maintained, current law regarding video 
	franchising has not stifled competition.  Indeed, the lack 
	of competition is the result of business decisions made by 
	telephone companies not to compete. Nationalizing 
	franchising is not going to solve the problem of whatever 
	telephone companies actually enter the market and compete.  
	Furthermore, local video franchising has a long record of 
	success.  Those who are now making claims to the contrary 
	have not been completely forthcoming about the nature of 
	the franchising process or about their own recalcitrance 
	in franchise negotiations.  To my knowledge, no telephone 
	company engaged in this current debate has ever been 
	denied a video franchise in any community where they have 
	applied for one.  We believe, as you do, that the current 
	law could be improved to further promote the provision of 
	competitive video services to America's communities.  We 
	look forward to working with you and your staffs to find 
	the best way to address our shared goals of greater 
	competition and wider access to the most modern video 
	services available.  Thank you.
	[The prepared statement of Kenneth Fellman follows:]

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

Introduction 
Good morning Chairman Upton, Representative Markey and other 
distinguished members of this Subcommittee. My name is Ken Fellman, 
and I am the Mayor of the City of Arvada, Colorado.   I want to 
thank all the members of the committee that have worked so hard to 
get us to this point.
I appear here today on behalf of the local governments across the 
nation, as represented by the United States Conference of Mayors 
(-USCM-), the National League of Cities (-NLC-),  the National 
Association of Counties (-NACo-), the National Association of 
Telecommunications Officers and Advisors (-NATOA-), the National 
Conference of Black Mayors (-NCBM-), the Government Finance 
Officers Association (-GFOA-), the International Municipal Lawyers 
Association (-IMLA-), and TeleCommUnity.
On behalf of local government, we would like to thank you for the 
opportunity to testify on this new legislation.  Needless to say, 
the short time frame between the release of the draft and this 
hearing has presented some interesting challenges in reviewing the 
bill, but I hope I can shed some light on our continuing concerns.  
To begin, we believe this draft is more responsive to those issues 
we have raised with the Committee in the past, and stand ready to 
continue working with the Committee to correct what we perceive as 
flaws in the legislation.  Having said that, we are very concerned 
that this new structure will lead to difficult and lengthy 
litigation, the will cost everyone dearly. 
Hopefully I can dispel many of the untruths that have been 
circulated recently pertaining to local government involvement in 
video franchising, while responding to specifics of the bill. We 
would like to be your -myth-busters- for today - to cut through 
some of the deceptive claims and to provide you with a truthful 
picture of the status of cable franchising in the market today, 
as well as how that franchising supports the desired delivery of 
new competitive entrants and services.  

Title VI Franchising is a National Framework with an Essential 
Local Component 
Congress struck the right balance in 1984 when it wrote Title VI 
into the Act, and again in 1992 when it made appropriate consumer 
protection improvements to it. Title VI established a light-touch 
national regulatory framework for cable television video services 
that includes appropriate local implementation and enforcement. 
The Act currently authorizes local governments to negotiate for 
a relatively limited range of obligations imposed on cable 
operators. Virtually none of these obligations is mandatory, and 
each is subject to decision-making at a local level. The current 
legal structure provides for something I hope we would all agree 
is important: local decisions about local community needs should 
be made locally. The proposed legislation retains the linkage to 
Title VI, which we see as appropriate, and attempts to address 
these local issues.  However, we believe the language can be 
improved.
Local governments embrace technological innovation and competition 
and actively seek the benefits such changes may bring to our 
communities and to our constituents. We want and welcome genuine 
competition in video, telephone and broadband services in a 
technologically neutral manner, and support deployment as rapidly 
as the market will allow. Local governments have been managing 
communications competition for many years now "it is not new. 
What is exciting is the potential for new entry into video by a 
few well-funded and dominant players who appear to have finally 
made a commitment to enter into the video arena. We look forward 
to developing an even more successful relationship in bringing 
these competitive services to our citizens.  Unfortunately, this 
legislation would effectively remove local governments from helping 
to make that competition a reality.
Local government remains concerned that rhetoric and not facts have 
led members of Congress to believe that competition and innovation 
will flourish only if local government is removed from the equation. 
We are here today to help you understand that nothing could be 
farther from the truth. Throwing away local franchising is not the 
solution that will bring competition or rapid entry by competitive 
providers. This legislation does not solve the many questions 
associated with accelerated entry into the video business.
Local government has been anxiously seeking the competitive provision 
of video services for many years - and indeed the Communications Act 
has explicitly guaranteed such opportunities since 1992. Despite 
several previous changes in federal law to ease their entry into the 
video market, the telecommunications companies seeking new laws today 
have not brought forth the competition they promised. The reason is 
not local governments. The reason is not the current federal law. The 
reason is market place economics. The provision of video services has 
not yet proven to be as financially attractive as the telephone 
companies apparently require in order to provide the services they 
claim are the new lynchpin to their success. I believe that a brief 
review of the current law will demonstrate this trend.  One of the 
shortcomings of the proposed legislation is an adequate definition of 
a threshold for competition.  Is a single subscriber sufficient to 
trigger -cable competition-?  The proposed legislation suggests that 
it is, and we would argue this is bad public policy. Is it reasonable 
for Congress to decree that locally negotiated franchises will be 
trumped whenever a competitor gets a national franchise only serving 
a small portion of the incumbent's footprint, thereby allowing the 
incumbent to walk away from its local franchise and take advantage 
of that minor competitor?  Also unclear is whether or not a company 
offering of IPTV as a video alternative to cable is actually covered 
in the definition of -cable operator- in the draft.  If IPTV is not 
covered by this proposed legislation, is this not a futile exercise? 
These are the some examples of the issues that need resolution.

Managing Public Rights-of-Way is a Core Function of Local Government 
Even as technologies change, certain things remain the same. Most of 
the infrastructure being installed or improved for the provision of 
these new services resides in the public streets and sidewalks. 
Local leaders are the trustees of public property and must manage it 
for the benefit of all. We impose important public safety controls 
to ensure that telecommunications uses are compatible with water, 
gas, and electric infrastructure also in the right-of-way. Keeping 
track of each street and sidewalk and working to ensure that 
installation of new services do not cause gas leaks, electrical 
outages, and water main breaks are among the core police powers of 
local government. And while it seems obvious, these facilities are 
located over, under or adjacent to property whose primary use is the 
efficient and safe movement of traffic. It is local government that 
best manages these competing interests. While citizens want better 
programming at lower prices, they do not want potholes in their 
roads, dangerous sidewalks, water main breaks, and traffic jams 
during rush hour as a consequence.  We question whether this 
legislation adequately addresses constituent/citizen interests in 
protecting and managing the public rights-of-way.
While the legislation preserves local authority, the draft fails 
to provide sufficient enforcement authority to assure compliance.  
We strongly object to the FCC being the appropriate forum for 
resolving local right of way disputes, and while the legislation 
is silent on the matter, we believe by default that task would 
move to the FCC.  Just as with the current Act, a court of 
competent jurisdiction is a more appropriate forum for resolving 
such disputes.

Neither Franchising nor Current Regulation is a Barrier to 
Competition 
The concept of franchising is to grant the right to use public 
property and then to manage and facilitate that use in an orderly 
and timely fashion. For local governments, this is true regardless 
of whether we are franchising gas or electric service, or multiple 
competing communications facilities - all of which use public 
property. As the franchisor we have a fiduciary responsibility to 
our citizenry that we take seriously, for which our elected bodies 
are held accountable by our residents.
Our constituents demand and deserve real competition to increase 
their options, lower prices and improve the quality of services. 
As you know, a GAOstudy showed that in markets where there is a 
wire-line based competitor to cable, cable rates were, on average, 
15% lower. Please understand that local governments are under 
plenty of pressure every day to get these agreements in place and 
not just from the companies seeking to offer service. I know this 
Committee has heard some unflattering descriptions and 
anticompetitive accusations regarding the franchise process, and I 
would like to discuss with you the reality of that process. 

Like Services Alike
We are encouraged that most of the telephone industry executives and 
their staff tell us that they fully support local governments' 
management and control of rights-of-way; that they are willing to 
pay the same fees as cable providers; that they are willing to 
provide the capacity and support for Public, Educational and 
Governmental (-PEG-) access programming, and even that they are 
aware of and agree to carry emergency alert information on their 
systems. And yet - at least one company claims it is not subject to 
current law and they do not have to do these very things through 
local franchise agreements. 
Congress must realize that local government franchising has 
facilitated the deployment of not only the largest provider of 
broadband services in this country - namely the cable industry - 
but that we also facilitated the entry of literally thousands of 
new telephone entrants immediately after the passage of the 1996 
Telecommunications Act. We are well versed in the issues of 
deployment of new services, and have managed competitive entry 
for the benefit of our communities for many years. Local government 
supports treating like services alike. 

Private Companies Using Public Land Must Pay Fair Compensation 
At the same time that we manage the streets and sidewalks, local
government, acting as trustees on behalf of our constituents, must 
ensure the community is appropriately compensated for use of the 
public space. In the same way that we charge rent when private 
companies make a profit using a public building, and the federal 
government auctions spectrum for the use of public airwaves, we 
ensure that the public's assets are not wasted by charging 
reasonable compensation for use of the public rights-of-way. Local 
government has the right and duty to require payment of just and 
reasonable compensation for the private use of this public 
property - and our ability to continue to charge rent as a 
landlord over our tenants must be protected and preserved. We 
believe the proposed legislation makes an attempt to do this, 
however, it may have fallen short of the goal because even though 
it provides for franchise fees, it does not provide for auditing 
the payments or provide for enforcing payment obligations.  
We are also specifically concerned about some exclusions in the 
definition of -gross revenues.-  Paragraph C excludes revenue 
from -information services- in defining gross revenue.  Since the 
Brand X decision by the Supreme Court, there has been a move to 
define most IP-based services as an -information service.-  Some 
telephone companies have argued that IP video programming is an 
-information service- and not a -cable service.- Is this a 
backdoor way to avoid paying franchise fees?  Also, Paragraph (E) 
excludes from gross revenues -any requirements or charges for 
managing the public rights-of-way with respect to a franchise 
under this section, including payments for bonds, security funds, 
letters of credit, insurance, indemnification, penalties, or 
liquidated damages;-  We believe this goes substantially beyond 
reasonableness and should be stricken from the draft.  It would 
basically allow companies to exclude from gross revenues any costs 
associated with protecting the public or damages incurred as a 
result of being a bad actor in the franchising area. Essentially 
this language allows a company to take credit against franchise 
fee obligations for any damages it may cause in a community. Are 
FCC penalties and fees excluded from gross revenue?  The draft is 
not clear.
It is also unclear as to the definition of the local franchising 
areas for new entrants.  What is their operational footprint? Who 
are they responsible for paying? How is that determined? 

Social Obligations Remain Critical Regardless of Technological 
Innovation 
Communications companies are nothing if not innovative. When you 
think back over the course of the past 100 years, the changes in 
technology are mind-boggling. At the same time, the social 
obligations developed over the last 60 years have endured. I 
strongly urge the Committee to engage in a deliberative process, 
and take the time necessary to engage in dialogue and debate to 
ensure that any legislative changes adopted this year will be as 
meaningful 20 years from now as they are today. 

Historical and Current Role of Social Obligations 
I appreciate the opportunity to discuss with you the important 
social obligations inherent in current video regulation, and to 
explain why these core functions must be preserved, regardless of 
the technology used to provide them. These include the allocation 
of capacity for the provision of PEG access channels, prohibitions 
on economic redlining, and a basic obligation that local government
evaluates, and the provider meets, the local needs of the community 
it serves, including public safety needs. 

Public, Educational and Governmental (PEG) Access 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. Traditionally the local franchising authority 
has determined the required number of channels and amount of 
financial support required to meet community needs, it then 
determines 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 local 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 television, including in 
some cases, television shows hosted by our Congressional 
representatives. Whether it is video coverage of governmental 
meetings, information about government services or special programs, 
local law enforcement's most wanted, school closings or classroom 
instruction, the government access or PEG programming is used to 
disseminate this information and to better serve and interact with 
our constituents. Local governments continue to make innovative 
uses of this programming capacity as new interactive technology 
allows more valuable information to be available to our 
constituents.  
The proposed legislation acknowledges the importance of these video 
offerings and provides for PEG capacity on new entrant systems, 
provides for interconnection between existing PEG and INET capacity 
to the new entrant and provides a mechanism to make that happen.  
The proposed legislation also provides for PEG financial support 
and for expansion of PEG capacity every ten years.  These are all 
very well intentioned, and clearly the Committee heard most of what 
local governments were saying about the importance of these 
resources. However, the draft provides for only one percent of 
gross revenues to go for PEG support.  In some jurisdictions, this 
will be sufficient.  In others it may not. We would recommend that 
along with the one percent, those jurisdictions that have negotiated 
a higher figure be allowed to maintain that rate per subscriber, 
sufficient for maintain existing services.  We also recommend that 
the financial support use definition be expanded to include 
"operations."

Economic Redlining 
One of the primary interests served by local franchising is to 
ensure that services provided over the cable system are made 
available to all residential subscribers within a reasonable period 
of time. These franchise obligations are minimal in light of the 
significant economic benefits that inure to these businesses that 
are given the right to make private use of public property for 
profit. While there may be those who find certain franchise build 
out obligations unreasonable - we find them to be essential. The 
concept of -universal service- in telephone is no less important 
than in the case of broadband. Those who are least likely to be 
served, as a result of their economic status, are those whom we 
need most to protect. This deployment helps to ensure that our 
citizens - your constituents -- young and old alike, are provided 
the same opportunities to enjoy the benefits of cable and broadband 
competition - regardless of income. The capacity that broadband 
deployment offers to our communities is the ability of an urban or 
rural citizen to become enriched by distance education, and other 
opportunities that until recently were not available. But that will 
never happen if only the most fortunate of our residents, and the 
most affluent of our neighborhoods, are the ones who receive the 
enormous benefits of broadband competition.    The spectre of 
"buildout" requirements haunts the discussion of serving the 
full community.  Local governments have been managing this 
process for decades, and there is no reason to believe it cannot 
continue.  Local officials have a responsibility to assure that 
the citizens of the community have access to competition.  At the 
same time, we recognize that there needs to be sufficient 
flexibility on the part of the local franchising authority to 
address real world challenges, such as very low subscriber density, 
actual operational footprint of competitors and so on. The proposed 
legislation does take on the challenge of opposing redlining, but 
once again fails to provide sufficient enforcement authority 
(indeed, the draft is incomplete in this area) to protect 
constituents. These should be local decisions with local enforcement 
based on local factors, not issues decided by Congress or the FCC.  

Public Safety and 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 cable franchisees to provide 
institutional networks as part of the grant of a franchise. An 
institutional network is a network dedicated to the purpose of 
governmental and institutional communications needs. These are 
essentially -intra-nets- serving government facilities including 
police and fire stations, hospitals, schools, libraries and other 
government buildings. Institutional networks are typically designed 
to use state-of-the-art technology for data, voice, and video and 
allow local governments to utilize advanced communications services 
at minimal taxpayer expense. It has proven effective not only for 
day to day municipal and educational training and operations - but 
essential in emergencies such as September 11, 2001. 
The proposed legislation does address Emergency Alert Systems in 
that it provides for local government utilization of a cable 
operator's emergency alerts system.  The proposed legislation 
should make clear that new entrants can be required to provide 
emergency alter systems in our communities.  Also in the VoIP 
arena, the Committee acknowledges the need for 911 and E911 
capability for public safety.

Public Interest
I suggest to the Committee that these public interest obligations, 
noted above, 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 would not yield to the 
simplistic notion that reducing public obligations on providers is 
always the best course.  Customer service and consumer protection 
are examples of this concern.  Should every community be required 
to do no more than what the FCC mandates, some citizens may not be 
afforded the protection they deserve.  Telephone and cable companies 
are well versed in these arenas at the local level today.  It should 
not be a problem for them to maintain (and hopefully improve) their 
customer service and consumer protection.  Major problems with the 
customer service provisions of the legislation are that its local 
enforcement decision to be appealed (and ultimately enforced) at 
the FCC.  Neither consumers nor local governments can afford the 
expense of that kind of enforcement mechanism.  Moreover, the 
legislation allows a local government to charge a "nominal fee" to 
cover the cost of issuing enforcement orders.  This "nominal fee" 
language should be replaced with a provision to cover actual costs, 
including reasonable attorney fees. Local government must be able 
to enforce these important safeguards, and must be able to the cost 
of doing so.  
We also believe that at renewal, providers should be subject to a 
public hearing to determine whether they have violated any of the 
four conditions for revocation, and whether they have met the 
customer service and consumer protection standards.
 
Strong Enforcement 
As I have repeatedly said, local government should not be stripped 
of its power to enforce these local obligations. Currently, local 
government is able to audit companies that submit revenue and to 
enforce public safety obligations pertaining to rights-of-way in 
federal court. The Federal Communications Commission has no 
expertise in these areas and should not be given any authority over 
arbitrating revenue disputes or rights-of-way disputes. Such a 
radical expansion of federal power into local affairs is not 
warranted. 

Alternative to National Franchising
Local Franchising is Comparatively Efficient and Must Be Fair to 
Protect All Competitors 
Franchising need not be a complex or time-consuming process. In 
some communities the operator brings a proposed agreement to the 
government based on either the existing incumbent's agreement or a 
request for proposals, and with little negotiation at all, an 
agreement can be adopted. In other communities, where the elected 
officials have reason to do so, a community needs assessment is 
conducted to ascertain exactly what an acceptable proposal should 
include. Once that determination is made, it's up to the operator to 
demonstrate that it can provide the services needed over the course 
of the agreement or demonstrate that the requirements would be 
unreasonable under the conditions of the particular market. 
Furthermore, while some of the new entrants have asserted that 
franchise negotiations have not proceeded as fast as they would 
like, it is important to recognize that every negotiation must 
balance the interests of the public with the interests of the new 
entrant. Some new entrants have proposed franchise agreements that 
violate the current state or federal law and subject local franchise 
authorities to liability for unfair treatment of the incumbent cable 
operator vis-ï¿½-vis new providers. Some also seek waiver of police 
powers as a standard term of their agreement. No government can waive 
its police powers for the benefit of a private entity. In the same way, 
the federal government cannot waive the constitutional rights of its 
citizens. Unlike other business contracts that are confidential or 
proprietary, local government franchise agreements are public record 
documents, so a new provider knows the terms of the incumbent's 
agreement well before it approaches a local government about a 
competitive franchise. 
Local governments are obligated to treat like providers alike, and 
we believe in the concept of equity and fair play. In addition, many 
states have level playing field statutes, and even more cable 
franchises contain these provisions as contractual obligations on the 
local government. If the new competitor is seriously committed to 
providing as high a quality of service as the incumbent, the franchise 
negotiations should not be complicated or unreasonably time consuming. 
Moreover, local government has no desire to make new entrants change 
their current network footprint to duplicate the incumbent cable 
operator's technology or network design. Local government's concern is 
to treat all providers fairly, as required by current franchise 
agreements, by federal law, and good public policy. 

Franchising Provides for Reasonable Deployment Schedules - Objections 
to Reasonable Build Obligations are Red Herrings 
Nothing in franchising or current federal law requires a new video 
entrant to deploy to an entire community immediately. Local 
governments have been negotiating franchise agreements with new 
entrants for many years. In these cases, newly built developments may 
have one schedule while existing areas may have a different schedule. 
By managing the deployment as we do, we protect the new provider's 
investment in infrastructure. We protect the public from unnecessary 
disruption of the rights-of-way, including safe use and enjoyment of 
the public rights-of-way. And, we ensure that new entrants are 
provided with unfettered access in a reasonable and timely fashion, 
while ensuring that they comply with all safety requirements. This 
system has worked well for cable, traditional phone and other 
providers for many years, and is necessarily performed by the local 
government. Congress, when it authored Section 253 of the Act, 
preserved local government authority and evidenced its desire to 
maintain the federalist, decentralized partnership that has served 
our country well for 200 years. Unfortunately, this bill appears to 
abrogate these important principles of federalism.

The Current Framework Safeguards Against Abuse and Protects 
Competition 
The current framework ensures that all competitors face comparable 
obligations and receive the same benefits, ensuring a fair playing 
field and avoiding regulatory gamesmanship. Federal safeguards protect 
against abuse. Local governments generally are prohibited from 
requiring a video service network provider to use any particular 
technology or infrastructure such as demanding fiber or coaxial cable. 
Local governments can require that construction and installation 
standards be adhered to and that systems are installed in a safe and 
efficient manner. Local governments require compliance with the 
National Electric Safety Code to protect against the 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 capabilities. 
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 franchise holders 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. 
 
Local Government Helps Ensure Broadband Deployment 
We all share the concern of a lack of broadband access throughout 
America, in urban and rural areas alike. Regardless of the locality, 
it is likely that communications technologies will be a driving force 
in the economic opportunities enjoyed by these communities that have 
access to advanced services. I believe that the Cable Act has 
provided significant benefits to consumers and communities alike, and 
I believe that local governments should be applauded for ensuring that 
those benefits are provided in a timely, fair and efficient manner to 
as many constituents as possible. Under the current regulatory regime, 
cable enjoys the highest deployment rate of broadband in this nation, 
with over 105 million homes having access to cable modem service. The 
cable industry is now reaping the economic benefits of an 
infrastructure that is capable of providing broadband access to all 
of our citizens. It is local government's oversight and diligence, 
through the franchise process, that has ensured that our constituents 
are not deprived of these services. Local government is the only 
entity that can adequately monitor and ensure rapid, safe and efficient 
deployment of these new technologies when they are being installed on a 
neighborhood-by-neighborhood level in our local rights-of-way.
 
Changes Local Government Agrees Would Enhance the Competitive 
Environment 
We appreciate the opportunity to share with the Committee, based on our 
extensive expertise, those sections of the Act that, with some 
modification, would enhance the provision of competitive services within 
our communities, rather than pursue the strategies of this legislation.
 
Application of Title VI 
Local government seeks modifications to clarify that the provision of 
multichannel video services through landline facilities, regardless of 
the technology used, falls within the scope of Title VI. The Act does 
not permit local government to dictate the nature of the technology 
employed by the provider. It does permit the local government to 
require that once the technology has been selected, that the quality 
of the service is acceptable. The quality of service should be 
maintained, and it should apply in a technology neutral manner. 
 
Uniform Assignment of Responsibilities Among Levels of Government 
Local government should retain authority over local streets and 
sidewalks, no matter what provider is offering service, or what 
service is being offered. At the same time Congress is considering 
allowing federal agencies to determine which companies can offer 
video services, all companies in the local rights-of-way should be 
responsive to the local government. 

Streamlining of Franchise Negotiations 
Title VI establishes the broad framework for those elements that may 
be negotiated in a local cable franchise. The provision of PEG access 
capacity and institutional networks is specifically protected in the 
current Act. Requirements in that regard should be presumptively 
reasonable, and a local government should be given the flexibility to 
determine the appropriate amount of capacity and the appropriate level 
and use of funding support necessary to meet its local community's own 
particular needs. The current Act permits extensive community needs 
assessments, which while valuable, may be costly and time consuming, 
and may prove unnecessary when considering the applicability of the 
obligation on a new entrant. We believe that when a competitive 
franchise is under consideration, the local government should have 
discretion to use these tools on an as-needed basis to verify, but 
not be obligated to -prove,- the need for the particular PEG or 
institutional network requirement. The Act should require a new 
entrant to provide at least comparable capacity and support for the 
provision of PEG access, as well as for the provision and support of 
institutional networks. Similarly, local governments must be 
authorized to require the interconnection of these services between 
the incumbent provider's system and new entrant's system, to ensure 
seamless provision of services to our citizens. 
Time Limits for Negotiations 
Local governments have experienced just as much frustration as many 
in the industry with regard to the time consumed by franchise 
negotiations. While it is easy to claim that local governments are 
the cause for delay, let me assure you that the industry is also to 
blame for not always pursuing negotiations in a timely and efficient 
manner. Just as the industry would call upon local government to be 
under some time constraint for granting an agreement, so too should 
they be held to time frames for providing the necessary information 
on which a decision can be made and for responding to requests to 
negotiate in good faith. Otherwise, a time frame merely gives the 
applicant an incentive not to reach an agreement but to wait until 
the time frame expires. We do not believe that it is unreasonable to 
establish some time frames within which all parties should act, 
whether it is on an application for the grant of an initial franchise, 
for renewal, transfer or for grant of additional competitive 
franchises. But these obligations must apply to both sides and must 
be respectful of the principles of public notice and due process. 
Applicants must be required to negotiate in good faith rather than 
insisting on their own -form- agreement. No community should be 
forced to make a determination without permitting its citizens 
"your constituents" the opportunity to voice their opinion if that 
is the process that government has put into place for such matters. 

Network Neutrality 
While traditional cable operators under Title VI operate on closed 
platforms, the Act itself does not address the variety of services 
or content that may be provided over that platform. Recent press 
accounts have indicated that telephone company new entrants in the 
video marketplace also want to be able to control the ability of 
the end user to access information purchased over the network. 
Faster speeds for those who pay more; and faster access to those 
locations on the Internet for which the content provider has paid 
a higher price to the network owner. Local government believes 
that permitting such favoritism and content control by a network 
owner is bad for the end user, bad for business and bad for the 
future of the Internet. To the extent that such issues need to be 
addressed within Title VI, we encourage the Committee to do so. 

Consumer Protection and Privacy 
The Communications Act has significant and meaningful consumer 
protection and privacy provisions. These are national rules with 
local enforcement and they include the ability of the local 
government to continue to enforce more stringent local consumer 
protection requirements. These rules must be extended to all 
video providers - to ensure that information on your personal 
choices of what you watch on whatever device you choose to 
receive your video signal on - is not being used in an 
impermissible or improper manner. 
Finally, we continue to support the ability of local governments 
and the citizens they serve to have self-determination of their 
communications needs and infrastructure. Title VI has always 
recognized our ability to do so in the video marketplace, and we 
hope that Congress will continue to agree that such should be the 
case regardless of the services delivered over the network. Where 
markets fail or providers refuse, local governments must have the 
ability to ensure that all of our citizens are served, even when 
it means that we have to do it ourselves. 

Conclusion 
In the rush to embrace technological innovation, and to enhance 
the entry of new competitors into the market, it is still the 
responsibility of local government to ensure that the citizens of 
our communities are protected and public resources are preserved. 
We are concerned that this legislation will undermine all that has 
been achieved through years of thoughtful and careful deliberation. 
Local control and oversight has served us well in the past and 
should not be tossed out simply as the -old way.- This year, as 
the discussion of the delivery of new products and services over 
the new technology platforms includes not just video but new and 
enhanced video products and other potential services, I strongly 
encourage this Committee to rethink its headlong rush to judgment 
on this legislation. It has been available to the public for just 
three days.  Certainly it is unnecessary to move so quickly as to 
ignore the substantial record of achievement evidenced by what we 
have shared with you today.  Thank you. I look forward to answering 
any questions you may have. 

	Mr. Upton.  Thank you.  Mr. McCormick, welcome back.
Mr. McCormick.  Thank you, Mr. Chairman.  On behalf of the United 
States Telecom Association and our member companies, I want to 
thank you for the opportunity to be here today to testify.  I want 
to express our deep appreciation for the enormous work that has 
gone into this legislation. 
	Mr. Chairman, we strongly support your efforts to bring 
	new video choice to America's consumers.  Franchise reform 
	will unleash new competition, and experience has shown that 
	competition will result in reduced rates for the nation's 
	66 million cable television subscribers.  Enactment of 
	franchise reform will also encourage investment in next
	generation broadband networks.  The ways in which Americans 
	communicate today, the ways in which they send and receive 
	information have changed fundamentally since the passage of 
	the 1996 act. Today you can make a phone call using a 
	wireline phone or a wireless phone or a cable phone or an 
	Internet phone.  You can get Internet access through DSL, 
	cable modem, wireless, or satellite, and increasingly over 
	power lines and municipal wi-fi systems.  Technology has made 
	it possible for cable operators who historically offered only 
	video to offer voice and Internet services.  There are no 
	franchise barriers to cable operators doing so.  Technology 
	has also made it possible for voice providers to offer video, 
	but an archaic governmental system that was meant for a time 
	when technologies were segregated, rather than converged, is 
	a barrier to competitive entry into video.  This legislation 
	recognizes that it is time to remove this barrier and to 
	promote the same competition in video that now exists in 
	voice.
	Make no mistake, local franchising requirements impede entry.  
	They extend the period during which consumers pay artificially 
	high prices.  Let me give you two real-world examples.  First, 
	Ben Loman Telephone Cooperative in McMinnville, Tennessee, has 
	upgraded its network and has the capacity to offer video 
	service to approximately 60 percent of its 42,000 customers.  
	However, in order to offer video, it must apply for and 
	receive 25 different franchise agreements, some of which are 
	required for areas in which it services just 100 to 200 
	customers.  After 18 months of trying, the company has 
	received only 15 franchises.  In the case of Verizon, one year 
	after engaging in franchise negotiations with 95 local 
	franchising authorities, only 10 have granted franchises and 
	85 remain in negotiation.  Typically the process takes 18 to 
	24 months.
	So Mr. Chairman, the quicker Congress acts, the better it is 
	for consumers.  Time is money.  According to a study by the 
	Phoenix Center, if franchise reform were to be postponed until 
	the next session of Congress, that one year of delay would cost 
	consumers an estimated $8 billion.  That equates to about 
	$75 per household per year.  So you are doing America a 
	service by moving forward immediately on video choice, an area 
	where there is clear consumer benefit as you continue to work 
	towards finalizing other important telecom reforms relating to 
	universal service, intercarrier compensation, and unleashing 
	the full benefit of the free market to traditional voice 
	services that face competition.
	Mr. Chairman, as we share your goal to see action on other 
	important telecom reforms before the end of this Congress, let 
	me take a moment to express our concern about three matters 
	unrelated to franchise reform that have made their way into 
	this bill, matters that we believe would benefit from further 
	consideration by the committee.
	First, on the issue of so-called net neutrality, our industry 
	has stated that it will not block, impair, or degrade consumer 
	access to the Internet and the FCC has made clear that it has 
	the authority to enforce its broadband principles.  Therefore, 
	legislation in this area we believe is premature.  There are 
	provisions in this legislation that benefit VOIP providers by 
	giving them rights of telecommunications carriers, without 
	imposing upon them the corresponding social responsibilities 
	relating to universal service, consumer privacy, and access 
	for the disabled.  These matters should also be left to 
	further telecom reform.
	And finally, with regard to municipal broadband networks, we 
	are concerned about this bill's preemption of State authority 
	over their own municipalities.  Again, we would suggest that 
	this subject be left to the broader telecom reform debate.
	Let me conclude, Mr. Chairman, by saying thank you.  We 
	applaud you bringing Americans TV freedom and we look forward 
	to working with you towards speedy and final action on video 
	choice in this Congress.
	[The prepared statement of Walter McCormick follows:]

 Prepared Statement of Walter B. McCormick, Jr., President and Chief 
 Executive Officer, United States Telecom Association


	Mr. Walden.  [Presiding]  Thank you, Mr. McCormick.  
	Mr. McSlarrow, welcome.  We look forward to your comments.
 Mr. McSlarrow.  Thank you, Mr. Chairman.  At the outset, let me just 
 say, the cable industry supports reforming and streamlining the 
 franchising process.  We put out last year a roadmap to reform that 
 consisted primarily of trying to ensure that if time was the issue 
 for new entrance to get into the marketplace, that should be taken 
 off the table and we would support any effort to grant them a 
 franchise within as little as 30 days.  We also thought it was 
 important that there be a level playing field.  We are talking 
 about competing with the telephone companies, some of the largest 
 communications in the world and certainly the largest in America, 
 we ought to all be playing on the same field.  We also thought it 
 was important to recognize whether or not the scheme is called 
 local franchising, national franchising, or even State, that we 
 needed to grapple with fundamental realities of sets of 
 responsibilities that are properly subject to the local control to 
 State, perhaps, and to the Federal government.
	The bill last year, and there were two versions, BITS I and 
	BITS II, we opposed because we thought it was not the right 
	course.  We didn't think it made sense to pick winners and 
	losers on the basis of technology and so we are pleased that 
	this bill moves away from that construct.  We also have made 
	the argument that Members have already recognized this 
	morning, that you need to look at the entire marketplace.  In 
	a bundled world where voice, video, and data are being sold 
	and marketed by many different providers to consumers, you 
	need to look at that entire marketplace.  We thought it was 
	important that a recognition of the voice marketplace be 
	reflected in the bill and so we are pleased that with the 
	interconnection language that has been put in, that that has 
	been recognized as well.  And ultimately, it is clear that in 
	this bill as introduced, there really was an effort to seek 
	to provide a level playing field.  So all of that in our view 
	represents significant progress.
	Some practical observations, however, about the bill. Even 
	though our preferred solution is to reform and streamline the 
	local franchising process, you can certainly make an 
	intellectually coherent argument for a national franchising 
	process.  You can do it on the basis of simplicity, regulatory 
	certainty, and deregulation, but frankly, if those are the 
	goals of a national franchise, I would submit respectfully, 
	this doesn't actually accomplish that.  A couple of examples.  
	A telephone company comes into a market and starts offering 
	video.  Under this bill, they get a national franchise.  If 
	they do that, the good news is there is a level playing field 
	so the incumbent cable operator can get a national franchise.  
	However, if both the telephone company and a cable company 
	already have franchises before date of enactment, those local 
	franchises keep going until expiration.  Most bizarrely of all, 
	if a telephone company gets a national franchise followed by a 
	cable company and then the telephone company exits the market, 
	we are at risk of the national franchise and have to go reapply 
	for a local franchise.  Now, I am not certain that that is what 
	was intended by the drafting, but that is what is present and 
	so I would suggest and would be happy to work with you, there 
	needs to be some work done.
	When it comes to interconnection, I said a moment ago that we 
	were pleased that there is a recognition of the voice market.  
	As currently written, we think that the rights extended to 
	VOIP providers ought to be expanded to at least match that of 
	the CLECs, granted in the 1996 Act, and so we look forward to 
	working with you on that as well.
	Another issue that I think bears thinking about is this issue 
	of non-discrimination, in the provision of video service.  
	Everybody, every Member that I have talked to, probably 
	everybody on this panel, certainly my good friend Walter 
	McCormick and his constituent companies, all say we support 
	the anti-discrimination language, the anti-redlining language 
	that is in current law, but how can that possibly be effective 
	language in a circumstance where you contemplate a company's 
	ability to self-select the markets they serve.  It is just an 
	illusion.  So I would submit you can go down one of two paths.  
	You can just say it is no longer a bipartisan policy as has 
	been present for 20 years and just go down that path, or if it 
	is going to mean something, then I think we need to step back 
	and think about what non-discrimination means in the context 
	of a national franchising scheme. 
	Last point, I hate to agree with my colleague from USTA, but 
	real concerns that crafting the line on net neutrality where 
	the marketplace is working and having the Government regulate 
	the Internet for the first time is a mistake and so we just 
	urge you to reconsider that as well.  Thank you.
	[The prepared statement of Kyle McSlarrow follows:]
 
Prepared Statement of Kyle McSlarrow, President and Chief Executive 
Officer, National Cable & Telecommunications Association

Chairman Barton and Members of the Committee, my name is Kyle McSlarrow 
and I serve as President and CEO of the National Cable & 
Telecommunications Association (NCTA), which is the principal trade 
association representing the cable television industry in the United 
States. Its members include cable operators serving more than 90% of 
the nation's cable television subscribers, as well as more than 200 
cable programming networks and services. NCTA's members also include 
suppliers of equipment and services to the cable industry. The cable 
industry is the nation's largest broadband provider of high speed 
Internet access after investing $100 billion over ten years to build 
out a two-way interactive network with fiber optic technology. Cable 
companies also provide state-of-the-art digital telephone service to 
millions of American consumers. 
Thank you for inviting me to comment on proposed legislation to reform 
the video franchising process. I would also like to thank you, 
Chairman Barton, Chairman Upton and Congressmen Dingell, Markey and 
Pickering, and the members of this Committee for your work on these 
issues and your willingness to listen to the concerns and views of 
the cable industry throughout the process. 

Cable Embraces Competition and Less Regulation 
Mr. Chairman, the cable industry fully embraces, and thrives today 
in, a robust, competitive marketplace. Our policy for several decades 
has been to minimize regulation on us and our competitors. The cable 
industry has never asked Congress for a handout and we don't seek to 
obtain regulatory advantages over our competitors. Nor have we 
opposed efforts designed to lighten regulatory burdens on our 
competitors in order to foster fair competition on a level playing 
field. 
For example, in 1999 the cable industry supported the Satellite Home 
Viewer Improvement Act (SHVIA), which authorized direct broadcast 
satellite (DBS) providers to offer local broadcast signals. DBS 
providers were given -local-into-local- authority but were required 
to follow the same rules as cable and other MVPDs when they offered 
local signals. SHVIA established a fair and level playing field for 
multichannel video competition. And as a result, growth in DBS 
subscribership exploded and competition in the multichannel video 
marketplace is thriving. Today, two national DBS providers have 
captured nearly 30 percent of the MVPD marketplace. 
The cable industry did not oppose a key provision of the 1996 
Telecom Act that eliminated rules prohibiting telephone companies 
offering video service. Rather, we supported that legislation 
because it offered all competitors the ability to enter new markets 
on fair, market based terms and established a stable deregulatory 
environment. 
And, more recently, the cable industry supported the efforts of the 
telephone companies to deregulate their high speed Internet access 
service so that they could compete with all broadband providers on 
a level playing field. 

Franchise Reform Legislation Should Streamline the Process and 
Establish a Level Playing Field 
Our primary interest in franchise reform is to ensure that all 
competitors in the video marketplace compete under the same set 
of rules, rules that can undoubtedly be streamlined in a more 
deregulatory market. 
To the extent that Congress believes that the franchise process 
needs to be modernized, the cable industry has clearly stated 
its preferred path to reform. We have expressed support for 
franchise reform that embodies the following principles: 
 	First, in order to expedite entry to market for new 
 	competitors, we believe that Congress should streamline 
 	the process by limiting the time that local franchising 
 	authorities have to consider an application to provide 
 	video service. 
 	Second, it is critical for all providers of video services 
 	to be treated on a level playing field. An incumbent should 
 	have the right to opt into any new franchise agreement that 
 	has better terms and conditions. The government should not 
 	pick winners and losers in the broadband industry by 
 	establishing a different set of rules that favor one 
 	provider over another. 
 	Third, local governments should maintain oversight with 
 	respect to rights-of-way management, meeting community 
 	needs and interests (including the equitable sharing of 
 	PEG and institutional network responsibilities), and 
 	enforcement of non-discrimination requirements. 

The Telephone Companies Have Had a Decade to Enter the Video Market 
In 1996 when Congress lifted the ban on telephone entry into the 
video business, it was a significant change in federal 
telecommunications policy. For decades, Congress kept the telephone 
companies out of the video business for fear that their monopoly 
control over the local phone market would allow them to exert market 
power in a way that would harm video competition. This threat was 
based on the telephone companies' anticompetitive behavior regarding 
pole attachments and their incentive and ability to shift costs 
associated with video service into their regulated telephone rate 
base and thereby unfairly cross-subsidize their entry into the video 
business with revenues from their telephone monopoly. 
However, Congress lifted the ban in 1996 largely because the ï¿½96 
Telecommunications Act also established rules to promote competition 
in the local voice market. Congress hoped that such competition would 
inhibit the ability of the Bells to use their telephone monopoly to 
enter the video marketplace in an anticompetitive manner. 
The ï¿½96 Act gave the phone companies four options for entering the 
video business and expressly stated that if they chose to enter as a 
cable system, they would be subject to the same requirements of Title 
VI as any other cable operator. At that time, the telephone companies 
didn't complain that the local franchising process was a barrier to 
entry and Congress evidenced no interest in freeing telephone 
companies that chose to enter the cable business from any of the 
traditional requirements that apply to cable operators, whether 
they were first to the market or last. To the contrary, recognizing 
that large incumbent telephone companies were fully capable of 
competing vigorously in the video marketplace, Congress stipulated 
that cable operators would be free from any remaining rate regulation 
whenever a telephone company entered an operator's franchise area. 
Now a decade later, having made little effort to enter the video 
business, the phone companies are back claiming that they need special 
rules that would allow them to enter the video marketplace in a manner 
that would give them a regulatory advantage over their competitors. It 
is remarkable that Congress would even entertain the Bells new pleas 
for special favors when the very rationale for allowing the Bell 
companies to enter the video business in the first place has yet to 
materialize-competition in the local voice market. Rather than 
spending the last ten years offering video competition, as they 
promised, they have invested their time and tremendous financial 
resources in the courts and at the FCC attempting to frustrate 
Congressional efforts to promote voice competition. They have 
successfully crushed most of their local voice competitors and 
swallowed their long distance competition. Ten years after the passage 
of the 1996 Telecom Act, the incumbent telephone companies still have 
a vice grip on 85% of the local telephone marketplace. 
Meanwhile, during those same ten years, competition to cable operators
from two large DBS companies has increased dramatically. In stark 
contrast to the behavior of the Bell companies, the cable industry 
responded to the deregulation of the 1996 Telecom Act and vibrant DBS 
competition by investing $100 billion in private risk capital to 
upgrade its facilities with state of the art fiber optic technology. 
The industry made this investment without government subsidies and 
with no guarantee of a return on its investment. And just like it 
created a multichannel video service from scratch, cable pioneered 
the residential broadband marketplace, while the telephone companies 
kept DSL technology on the shelf in order to preserve their high 
priced T1 business service. Cable's innovation and risk taking created 
the nation's largest broadband provider of high speed Internet access. 
Cable's broadband platform delivers digital video, high definition 
television, digital telephone service, and an array of new interactive 
services. 

The Existing Franchise Process Is Not a Barrier to Entry 
Despite a promise ten years ago that they would compete in video, the 
Bells are back, smaller in number but much larger in size with annual 
revenues of $150 billion more than twice that of the cable industry, 
telling Congress that they can't compete in video, in fact won't 
compete in video unless they are granted another special favor. They 
want to enter the video business on favored terms without obtaining a 
local franchise agreement. 
The Bells complain that the franchising process is a barrier to entry 
and that it takes too long to obtain franchise agreements. An 
examination of the facts shows that those claims are simply unfounded.  
Telephone companies - and other new video entrants - have long received 
local cable franchises. Shortly after Congress repealed the ban on 
telephone companies entering the video business, Ameritech obtained 
more than one hundred cable franchises. Ameritech did not waste time 
complaining about or seeking to avoid the franchising process. It 
simply went about obtaining cable franchises and it did so without 
resistance, unreasonable demands or delays by local franchising 
authorities. Ameritech's rapid progress in obtaining franchises 
continued until the company was acquired by SBC, which promptly sold 
off Ameritech's systems just as it terminated the efforts of Pacific 
Telesis and Southern New England Telephone to offer competitive cable 
service after acquiring those companies. 
Smaller broadband competitors with a fraction of the Bells' resources 
like WideOpenWest, Knology and RCN have managed to obtain franchises 
to compete with cable companies in hundreds of communities across 
America. And it looks like the telephone companies are managing to do 
so, too. 
Verizon CEO Ivan Seidenberg told investors in a January conference 
call that his company was making -good progress- on video franchising 
and that the franchising process does not pose -any impediment to our 
rolling out FiOS during the year 2006. As he explained to Business 
Week, -We haven't been turned down anywhere we've gone. 
And he's right. Verizon already has franchises covering approximately 
two million households, and there are many examples of Verizon 
obtaining approval in as little as 19 days to 4 months (Beaumont, 
California; Sachse, Texas; Herndon and Fairfax County, VA). In fact, 
in several instances Verizon has obtained franchise agreements faster 
than they are able to deliver service. For example: 
In Sachse, Texas, Verizon obtained a franchise in less than two 
months but took over a year to deploy video after being granted a 
franchise on December 6, 2004. 
In Fairfax County, Virginia, Verizon obtained a franchise in less 
than 3 months, but it took more than 5 months after receiving the 
franchise before it began offering video service in that community. 
In Beaumont, California, where Verizon obtained a franchise in less 
than 3 weeks, it did not begin to offer video service until more than 
15 months after it was granted a franchise. 
In Bellefonte, Delaware, where Verizon obtained a franchise in less 
than 50 days, it still does not offer video service more than 3 1/2 
months later. 
Ironically, some local governments complain that Verizon is actually 
responsible for delays in the franchising process. Several counties 
in Maryland have told the FCC that Verizon's own internal bureaucratic 
machinery creates substantial delay and has significantly contributed 
to much of the regulatory lag about which Verizon complains. 
The bottom line: a review of Verizon's franchises shows an average of 
4.3 months to obtain a franchise, and interestingly, an average of 
5.3 months after they get a franchise before they deliver video 
service. 
Most interestingly of all, AT&T can make no legitimate complaints 
about the franchising process at all because they, wrongly, assert 
that their video service does not require them even to comply with 
federal franchising rules. In other words, they haven't even tried. 

What the Bells Truly Seek Is a Green Light to Serve Only "High 
Value" Consumers 
So the Bells' complaints about process are nothing more than a 
smokescreen to hide the fact that what they really seek is to avoid 
the obligations that come with obtaining a video franchise. 
Specifically, what the Bell monopolies refuse to accept is the 
notion that the new competition they promise should be afforded to 
all of the communities they serve. It's really that simple. Having 
built their networks on the backs of ratepayers as a regulated 
monopoly for nearly a century, the Bells do not believe that they 
should be required to upgrade those networks in a manner that is 
equitable and nondiscriminatory. 
The Bells are making the case that their video service will bring 
widespread benefits to consumers while, at the same time, telling 
Congress that they should not be required to provide such service 
to all communities within their service area. For example, SBC (now 
AT&T) has announced to Wall Street that it would serve 90% of 
"high-value" customers, 70% of -medium-value- customers, and only 
5% of what they deem to be -low-value- customers. 
Ironically, in the past the Bells attacked voice competitors for 
the same type of cherry-picking they now want to practice as they 
enter the video business. SBC paid for advertising in major 
newspapers criticizing competitors who wanted to selectively target 
their customers. -We proudly make SBC service available to everyone, 
in every neighborhood, in every region we serve,- the SBC ads 
declared. SBC should have added a disclaimer: "But when it comes to 
video, we're not interested in serving ï¿½low-value' customers." 
If Congress believes that increased video competition is an 
important public policy, then it must confront how to ensure that 
the benefits of competition are made available to all citizens. 
Otherwise, the Congressional goal of promoting widespread deployment 
of advanced broadband services to all Americans will never be 
achieved and households in urban and rural America will be relegated 
to second-class service. 

The Committee Print is a Significant Step Forward 
The committee print under consideration today represents a 
significant step forward. Unlike previous drafts, the bill does not 
grant regulatory relief based on the technology used to offer video 
service. And the current proposal does not include new regulations 
on video services. 
As we have stated, we believe the better course is to reform and 
streamline the existing franchising process; however, we strongly 
support the policy decision reflected in the bill to seek to ensure 
a level playing field for video competition. While we can continue 
to debate the rules upon which new entrants offer video services, 
it is critical to ensure that all competitors compete under the 
same rules. There are also a number of areas where we believe the 
level playing field provisions of the Committee Print can be 
strengthened and clarified. Giving all providers of video services 
the ability to compete on a level playing field ensures that the 
marketplace rather than the government will choose winners and 
losers. Competitors will have the freedom to innovate and make 
business decisions based on marketplace realities rather than the 
vagaries of a skewed regulatory framework. 
A level playing field also creates a predictable and stable 
regulatory environment which is crucial for continued investment and 
innovation. In testimony before the Senate Commerce Committee on 
March 14, 2006, Aryeh B. Bourkoff (senior analyst at UBS Investment 
Research) said regarding franchise reform, "I stress the importance 
of maintaining a level playing field among all operators while 
allowing consumer preferences to dictate the changes to current 
models. Uncertainly among investors will persist if the rules 
surrounding obtaining a video franchise fluctuate based on the 
nature of the new entrants." 
Establishing a level playing field for video competition should be 
welcomed by the Bell companies who have argued for years that they 
should operate under the same regulatory framework as cable 
operators in the provision of high speed Internet access. AT&T 
said it best in comparing the regulatory treatment of cable modem 
and DSL service, "companies that provide similar services should 
be regulated the same. There is no reason for treating them any 
differently."

Rights and Obligations of VoIP Providers 
We are pleased that the Committee Print includes language that 
seeks to clarify that the interconnection rights Congress 
established in 1996 to promote voice competition apply to all 
providers of voice services on a technology neutral basis. The 1996 
Telecom Act provided interconnection rights to competitive local 
exchange carriers (CLECs) so they could exchange traffic with the 
Bells on an economic basis, without glitches or delays, in order 
to promote local voice competition. Limiting interconnection and 
related rights to providers of voice services using traditional 
technology would ensure the Bells retain their market dominance 
by hampering the introduction of digital voice services - the 
best hope for competition in the voice market. The bill correctly 
recognizes that any legislation to promote competition would be 
incomplete without addressing voice competition where the Bell 
companies still control 85% of the market. 

Network Neutrality Regulation Threatens Continued Investment 
We are concerned, however, that the committee print would, for 
the first time, impose regulation on the Internet. While simply 
codifying the FCC's network neutrality principles may, at first 
blush, look like a reasonable and innocuous attempt to ensure 
that network providers maintain openness; it could lead to 
endless and expensive litigation. 
With bandwidth usage growing at a rapid pace, continued investment 
will be needed to keep broadband services robust. If broadband 
providers are to continue to make these investments, and if consumers 
are going to be given the levels of services and innovative new 
products and features they desire, all at prices they can afford, 
broadband providers need to have continuing flexibility to develop 
new business models and pricing plans. Network neutrality rules will 
stifle that flexibility and discourage capital investment. 
The marketplace is highly competitive, where no real world problems 
needing a solution have been identified, and where the pace of 
technological development is breathtaking. There can be no better 
circumstances than these to leave regulation to the marketplace 
rather than government. 

Practical Issues Raised by the Committee Print 
While we have only had a few days to review the draft bill, we have 
identified a number of practical issues that would create uncertainty 
and ambiguity and frustrate the stated objective of replacing local 
franchising with a national scheme. We describe these issues below. 
They include the limitations imposed on the availability of a national 
franchise for incumbent cable operators, but the problems are by no 
means limited to that section of the bill. At a minimum, these issues 
should be resolved before the bill moves forward. 
Clarifying that All Providers Are Covered. While the draft bill 
establishes a national franchise to enable faster entry by "new 
cable providers" and appears intended to capture video services 
provided by the telephone companies, the failure of the bill to amend 
the definitions of cable service or cable system undermines this 
purpose. AT&T has argued extensively that its proposed service does 
not fall within the existing statutory definitions because it has 
incorporated IP technology into its delivery system, and that 
therefore it should not be subject to any franchise requirements. 
Nothing in the draft bill precludes AT&T from continuing to assert 
this position. While we believe AT&T's argument is meritless, 
Congress should use this opportunity to remove any ambiguity. Not to 
do so would abdicate to the FCC and the courts the fundamental 
question of whether this bill even applies to AT&T and other "IPTV" 
providers which, of course, could easily include cable operators. 
One could reasonably ask what the point of this bill is in such a 
circumstance. 
Ensuring A Level Playing Field. While the bill clearly seeks to 
establish a national franchising scheme allowing all providers to 
compete on a level playing field, in fact it creates a complicated 
structure in which providers offer cable service pursuant to a 
hodgepodge of national, state, and local franchises. It is, in short, 
a recipe for confusion. For instance, whether an existing cable 
operator is eligible for a national franchise is wholly out of its 
hands. Instead, it depends on the decisions and even the identity 
of its video competitor. In -franchise areas- that are unserved by a 
"new operator" on the date of enactment, for instance, an incumbent 
operator is ineligible for a national franchise unless and until a 
new operator "is providing service under a national franchise." Thus: 
No new entrant; no national franchise for the incumbent operator. 
New entrant elects a local franchise; no national franchise for the 
incumbent operator. 
New entrant obtains a national franchise; no national franchise for 
the incumbent operator until the new entrant actually starts 
providing service. 
New entrant's "franchise area" covers only a portion of the incumbent 
operator's service area; unclear whether operator can obtain a 
national franchise for its entire service area. 
In areas where an incumbent local exchange carrier is already 
providing service on the date of enactment in competition with an 
existing cable operator, neither is eligible for a national 
franchise. Each must wait until its current franchise is no longer 
in effect until it can obtain a national franchise -- and then can 
only do so if the other provider is still providing service in that 
area. This means that a cable operator can be locked into a 
municipal franchise for years while a telephone company operates 
under a more favorable state franchise, and then, when it is finally 
eligible for a national franchise, its ability to obtain one is 
dependent on the decision of the telephone company to remain in 
the market. 
Oddly, too, the bill does not even ensure that both providers are 
eligible for a national franchise at the same time. Where the 
telephone companies have negotiated franchises that allow them to 
walk away from the agreement in only a few years, they will be 
able to terminate such franchises and enjoy the benefits of a 
single, national franchise long before cable operators are eligible 
to request one. 
All providers must be able to predict their regulatory environment 
with more certainty in order to continue investing in the market. 
If the policy objective is a national franchise, then that 
objective should be available to all providers under the same 
terms and conditions. At a minimum, the regulatory status of one 
provider should not be dependent on the business decisions of a
competitor. 
Snapback Provision. Related uncertainty is created by the 
provision that automatically terminates an incumbent operator's 
national franchise in any franchise area where there is no 
competing cable operator for one year. Upon termination, the 
operator is left with no continuing authorization to provide 
service. The operator may obtain a new local franchise, but 
getting one is not automatic and the terms of the new local 
franchise are not established by the bill. Again, the 
operator's fate is dictated by the actions of its competitor. 
If the competitor pulls out of a market, the operator must 
apparently start from scratch to negotiate a new franchise 
with the local franchising authority. This entire section is 
absurd and should be deleted. 
No Meaningful Anti-Redlining. While the bill would prohibit a 
national franchisee from denying service to residential 
subscribers on the basis of income, it essentially allows a 
franchisee to self-define the -franchise areas- it will serve. 
A prohibition on redlining is essentially meaningless if a 
franchisee can simply limit its rollouts to wealthier 
communities or even neighborhoods. At a minimum, a -franchise 
area- should be defined as co-extensive with existing political 
subdivisions to limit the opportunity for the most blatant 
cherry-picking. 
The bill also undermines the redlining prohibition by moving 
responsibility for oversight of this requirement from localities 
to the FCC. Nondiscrimination is most effectively overseen and 
enforced by local officials who know their community best, not 
by the FCC. Further, the FCC is directed only to ensure that the 
cable operator extends access to the avoided group; a national 
franchisee violating the anti-redlining requirement faces no 
penalty for its discrimination and is not required to make 
service available within any particular time limit. Even though 
a nationwide franchise is the chosen method to ensure competitive 
entry, it is still important to preserve local input into that 
process. Localities are best positioned to determine whether 
deployment comports with anti-redlining rules. 
Large Increase in Fees. The bill substantially increases the fees 
paid by cable operators. First, the bill codifies an expansive 
definition of the -gross revenue- on which franchise fees are 
based, including revenues from advertising and promotional 
support. Second, all national franchisees would be required to 
pay up to an additional 1 percent of gross revenues to support 
PEG programming and institutional networks. This obligation 
would fall disproportionately on an existing cable operator which 
obtains a national franchise -- first, since 1 percent of its 
revenues would far exceed 1 percent of a new entrant's, and second, 
because the existing operator would also have to continue to 
provide -- apparently in perpetuity -- any institutional network 
that was required under its superseded local franchise. By 
contrast, local franchising authorities are expressly barred from 
requiring other national franchisees from constructing such networks. 
Finally, in addition to requiring national franchisees to pay 
6 percent of gross revenues -- and forcing existing operators to 
continue to provide institutional networks -- the bill authorizes 
new -rights-of-way management- fees. The intent may be to limit 
these fees to management-type activities such as permitting, 
inspection, etc., but unless the bill specifies that these fees 
must be -cost-based,- there will inevitably be litigation -- as 
there as been over the provision in the 1996 Act authorizing -fair 
and reasonable,- rather than -cost-based,- rights-of-way 
compensation -- over whether this provision authorizes localities 
to collect market-based rents. The bill should impose clear limits 
on the fees imposed on all providers, if we are to continue 
innovating and offering consumers new services and products. The 
bottom line is that the bill represents an increased tax on 
consumers for no additional benefits and should be substantially 
modified and reduced. 
Consumer Protection Requirements. The bill authorizes local 
franchising authorities to enforce the FCC's cable consumer 
protection rules, permitting them to issue orders requiring 
compliance with such rules. What the bill doesn't say is how a 
locality would enforce such an order. Would it be able to impose 
a fine? Would it be able to take an operator to state court, 
leading inevitably to a plethora of inconsistent interpretations 
of the FCC's rules? In the absence of further guidance, the 
objective of a nationally consistent set of consumer protection 
rules will be undermined. 
Net Neutrality. I have already explained our strong reservations 
about codifying the FCC's principles as binding requirements, 
enforceable by the Commission. Here I would only observe that 
the adjudication authorized by this section of the bill is 
without reference to any procedural safeguards, such as those 
applicable to cease-and-desist orders against broadcasters under 
section 312(b) of the Act or the imposition of forfeitures under 
section 503(b)(4). 
Interconnection. We recognize and applaud the bill's inclusion 
of a provision to make sections 251 and 252 of the 1996 Act 
applicable on a technology-neutral basis to competitive voice 
providers using IP technology. It is a step in the right 
direction, but what it gives with one hand it may take away with 
the other. IP-voice providers get the rights and duties of a 
competitive local exchange carrier (CLEC) under sections 251 and 
252 of the Communications Act -- but only -with respect to 
interconnection- and -associated- rights and duties -necessary 
to effectuate interconnection.- Since these sections address 
more than just interconnection, such as numbering, access to 
unbundled elements of the incumbent's network, and collocation 
at incumbent central office, IP-voice providers effectively 
have fewer rights than what CLECs presently have. Moreover, the 
language invites years of disputes over which parts of sections 
251 and 252 are -necessary- to -effectuate- interconnection. 
The bill also misses an opportunity to resolve the disputes 
pending in a growing number of states between rural carriers 
and CLECs over whether the latter can use their interconnection 
agreements in the provision of wholesale telecommunications 
service to IP-voice providers. While we are hopeful the FCC 
will address this issue, Congress can cut years off the process 
and provide needed certainty by clarifying the issue in law 
rather than also abdicating this issue to the agency and the 
courts. 
Municipal Broadband. The bill would overturn laws in over a dozen 
states that limit municipalities from constructing and operating 
broadband networks. These states have made the judgment that the 
risks to taxpayers outweigh any putative benefits of letting local 
governments enter this risky and competitive industry. The 1996 
Act was successful in promoting substantial private sector 
investment in broadband facilities. The cable industry alone has 
invested nearly $100 billion since 1996. Government-provided 
service in areas served by private enterprise will impose 
substantial burdens on taxpayers and undermine competition from 
non-government providers who must rely on risk capital. 
At a minimum, municipal broadband should be limited to areas 
where the private sector does not or is not likely to serve. To 
oversee their entry into broadband, governments should have to 
establish entities separate from the agencies that regulate 
communications providers in order to avoid conflicts of interests. 
Finally, the possibility of cross-subsidization through a wide 
range of devices, from tax revenues to below-cost loans relying 
on government borrowing power to discriminatory access to poles 
and conduits that are exempt from the Pole Attachment Act, 
demand more specific safeguards than the general language 
contained in the bill. 

Conclusion 
As Congress drafts changes to the Telecommunications Act of 
1996, we urge you to treat like services alike, preferably in 
a deregulatory environment. We will do the rest by raising 
private risk capital, investing in new technology, offering 
better customer service, creating innovative new programming, 
and competing with other multichannel video providers in order 
to provide consumers with the best voice, video, and data 
services possible. 
 
Mr. Walden.  Thank you, Mr. McSlarrow.  Mr. Regan, welcome. We 
look forward to your comments, sir.
Mr. Regan.  Thank you, Mr. Chairman.  Mr. Chairman, I am here 
on behalf of Corning Incorporated, as well as the 
Telecommunications Industry Association.  At the outset I would 
really like to thank you and thank the members of this committee, 
and I am sure few people come here to thank you but I am here to 
thank you.  I am here to thank you for your leadership on all 
the broadband issues.
	As you know, the entire telecom equipment industry has 
	been through some very, very difficult times.  Over the 
	last year after the telecom meltdown, Corning had to lay 
	off thousands and thousands of people.  We had six 
	fiberoptic plants.  We have one left today.  And I am 
	pleased to say because of the leadership of the members 
	of this committee, we now find ourselves in the situation 
	where we are actually hiring people again.  Folks at this 
	table are buying fiberoptics once again and I am pleased 
	to say that since the TRO went into effect, we have added 
	about 700 people.  So it is great to be on the other side 
	for a while adding people.
	We approach the telecom issues from a narrow perspective.  
	The question for us is really what is going to stimulate 
	investment in new network technologies, create 
	facilities-based competition in the interests of both 
	consumers and producers.  We step back, we sort of see 
	this thing in terms of two technology shifts that are 
	underway.  The first technology shift was from dial-up 
	access to current generation broadband.  It has about a 
	20-fold increase in capacity.  And the next generation is 
	from current to next and that is another 20 fold.  So let 
	me talk about it in terms of a highway.  It is like taking 
	95 from two lanes to 40 lanes and then taking it yet again 
	from 40 to 800.  This is pretty significant.
	Now, the good news is, the first shift is under way.  
	Today in America, we now have about 40 million people 
	hooked up to the Internet using current-generation broadband 
	capability.  That is up from five million, about an 
	eightfold increase since the year 2000.  And the thing that 
	drove this--there are a lot of things--but two things that 
	Government has control over are pro-competitive deregulatory 
	policies, and those are the things that have helped drive 
	this investment.  In the case of fiberoptics, we have seen 
	fiber to the prime increase in terms of home pass by over 
	15,000 percent in the case of homes served by over 10,000.  
	Admittedly, they are over small bases.  Now, the second 
	broadband technology shift is just underway.  Currently, 
	there are about one-half of one percent of Americans getting 
	Internet access over next-generation capability.  This is a 
	very immature industry.  So the next step really is to 
	promote competition through streamlined entry into the 
	video domain.  Video is the applications driver for the 
	next-generation capability.  High-definition bandwidth uses 
	150 times more bandwidth capacity than dial-up Internet 
	access.  So, it is a huge step forward.  Now, we studied 
	the impact of franchising with respect to our narrow slice 
	in the world and that is the narrow slice of fiber to the 
	home or fiber to the prime.  We have discovered that there 
	are three changes that could make a significant difference 
	in employment.  One is speed of entry, critically important 
	as people move into the triple-play market.  The second 
	thing is to avoid unreasonable build-out requirements, and 
	the third thing is to avoid and limit these extraneous 
	obligations that creep into these negotiations. Now, we 
	think that your bill really makes a strive at getting all 
	three things and we applaud that.
	The second thing that is important is to promote more 
	competition and that gets us into the question of municipal 
	entry.  Now, muni's were one of the first early adopters for 
	fiber to the home.  It is hard to believe but they were.  
	Now the courts have blocked that.  This bill fixes that and 
	we encourage that.  Significantly, this bill also provides 
	some level of parity, in that it gives cable companies the 
	same treatment as telephone companies in competitive 
	markets.  We think that it is a good idea.
	And finally, I would like to raise a flag of caution with 
	regard to the question of net neutrality.  Now, it appears 
	to us that consumers are being protected today with respect 
	to current generation broadband capability with a set of 
	connectivity principles that really came out of the 
	technology community.  We developed these and proposed them 
	to the FCC during the TRO and the FCC has seen light to put 
	those into effect, and our friends in the carrier community 
	have all endorsed them.  Now, a lot of questions have been 
	raised about another set of problems and we are concerned 
	about those problems.  We are concerned about those problems 
	because building these networks is going rough.  If you 
	take a look at the stocks of the companies that are stepping 
	up, Wall Street is not rewarding them for making those 
	investments.  In fact, you will see that with respect to 
	fiber to the prim, Verizon, you know, has been criticized 
	for making these kind of investments.  I know that they are 
	big companies and everybody said they can absorb these kinds 
	of problems, but the fact remains that it is tough for these 
	companies to do this and to satisfy their shareholders, so 
	we would encourage you to move very carefully into this 
	space to avoid unintended consequences.
	Thank you, Mr. Chairman.  You are on the right track.  We 
	encourage you to proceed. 
	[The prepared statement of Timothy Regan follows:]

Prepared Testimony of Timothy Regan, Senior Vice President, Global 
Government Affairs, Corning Incorporated.

Summary of Testimony of Timothy J. Regan

We approach telecom policy from a very simple perspective.  The 
question for us is:  What policies will facilitate investment in 
network technologies to promote facilities-based competition in the 
interest of both producers and consumers alike?
We believe that there are two technology shifts occurring in the 
broadband space.
The first broadband technology shift is from dial-up Internet access 
to current generation broadband access.  This is characterized as a 
shift from 56 Kbps narrowband Internet access to 1.5 Mbps broadband 
Internet access - about a 20-fold expansion in capacity.
The second broadband technology shift from current generation to next 
generation broadband is characterized by yet another 20-fold increase 
in Internet capacity from 1.5 Mbps to around 25 or 30 Mbps.
The very good news is that the first shift is well on its way thanks 
to Congressional and FCC leadership.  Deployment of current 
generation broadband in terms of subscribership has grown from five 
million subscribers in the year 2000 to nearly 40 million last year, 
an 8-fold increase.  Pro-competitive and deregulatory policies have 
facilitated this transition.
The second broadband technology shift is just beginning.  Only 0.5% 
of American households have access to next generation broadband.
Congress now must decide whether it wants to facilitate investment 
in next generation broadband capability.  If so, we recommend that 
Congress build on its past success by pursuing a pro-competitive, 
deregulatory agenda in the future.
Promoting competition through deregulation in the video realm is the 
next logical step.  The draft bill before you does this by vastly 
streamlining the franchising process.  The draft bill also promotes 
competition by providing the necessary statutory clarification to 
allow municipal entry.
Finally, we raise the flag of caution on the net neutrality issue 
because the problem we are trying to solve is not obvious.  And, 
serious negative consequences on network investment could arise if 
the wrong action is taken.

Mr. Chairman, I'm pleased to accept your invitation to testify 
today on behalf of both Corning Incorporated and the 
Telecommunications Industry Association.
As you know, Corning is the inventor of low-loss optical fiber.  
In fact, your former colleague in the House of Representatives, 
Amo Houghton, should be properly identified as one of the fathers 
of fiber optics.  He was at the helm of Corning at the time optical 
fiber was invented, and he invested hundreds of millions of dollars 
to prove to the world that data can be transmitted over extremely 
long distances using glass fibers as thin as hair.  
Corning is also a member of the Telecommunications Industry 
Association.  TIA provides a forum for over 600 member companies, 
the manufacturers and suppliers of products, and services used in 
global communications.  Many TIA members manufacture and supply 
products and services used in the deployment of the broadband 
infrastructure that enables the distribution of video programming.  
Because video programming and the franchise process is the core of 
the proposed legislation, my testimony today focuses on TIA' 
interest in this area.  
We approach telecommunications policy from a very simple 
perspective.  The question for us is:  What policies will 
facilitate investment in network technologies to promote 
facilities-based competition in the interest of both producers 
and consumers?
Contrary to popular view, we do not see the issue before 
Congress as a matter of choosing sides among the titans.  
Rather, we see the challenge as one of encouraging and allowing 
all parties to do their part in developing the most robust 
broadband communications network in the world.  That is the 
outcome that will provide the greatest benefit to all Americans.  

The First and Second Broadband Technology Shifts
With that in mind, we think it is helpful to review the recent 
history of broadband technology.  Essentially, we believe there 
are two technology shifts occurring in broadband.  
The first broadband technology shift is from dial-up Internet 
access to current- generation broadband access.  This is 
characterized as a shift from 56 kilobit-per-second narrowband 
capability to around 1.5 megabit-per-second (-Mbps-) broadband 
capability - roughly a 20-fold capacity expansion.  
The second broadband technology shift is from current-generation 
to next-generation broadband access, characterized by yet another 
20-fold capacity, from 1.5 Mbps to as much as 25-30 Mbps.
To give you an example of the effect of these two shifts, let me 
use the analogy of a highway.  The first broadband technology 
shift is like going from a two-lane highway to 40-lane highway.  
The second shift is like from going from 40 lanes to 800 lanes.  
Just imagine I-95 going from 2 to 40 to 800 lanes.
The good news is that the first shift is well on its way.  
Progress in technology deployment is often measured by the 
substitution of the new for the old.  By this measurement 
tremendous progress has been made in the deployment of broadband, 
where subscribership increased by more than 700% from 5.1 million 
in 2000 to 39.1 million in 2005, while dial-up subscribership 
peaked at 47.3 million in 2002 and has since declined to about 
40 million subscribers, the level that existed in 2000.  

U.S. Current Generation Broadband Subscribers
(in Millions)
 

Source:  In-Stat/MDR, FCC, TIA, Wilkofsky Gruen Associates

The second broadband technology shift has just begun and involves 
a number of different technologies, including fiber to the premises 
(FTTP), fiber to the node (FTTN), fiber to the curb (FTTC), VDSL, 
DOCSIS 2x and DOCSIS 3.0, satellite and various wireless technologies, 
all of which hold great promise and are in various stages of 
development and deployment. 
	Although TIA companies are involved in all of these 
	technologies, I am most familiar with FTTP and will 
	confine my remarks regarding the second broadband shift to 
	that technology. With respect to FTTP, the second stage 
	shift, although in its infancy, has been profound.  From
	September 2001 to January 2006, FTTP deployment increased 
	from19,400 homes passed to 3.6 million homes passed, an 
	18,500 % increase in four years.  FTTP subscribership 
	increased from5,500 inSeptember 2001 to 548,000 in 
	January 2006, a 10,000% increase over four years.

 FTTH Homes Passed(Cumulative-North America)in Thousands


Source:  RVA Research


FTTH Homes Connected(Cumulative-North America)in Thousands
 

Source:  RVA Research

While Verizon accounts for much of the FTTP deployment in volume, the
FTTP experience is broadly based.  As of October 2005, FTTP had been 
deployed in 652 communities across 46 states, with only 34% of those 
communities served by Verizon. 

The Importance of Pro-Competitive, Deregulatory Telecommunications Policy
The first broadband technology shift was driven by four forces:  
competition, deregulation, consumer demand for bandwidth, and technology 
advancement.  The federal government played a positive and significant 
role in the first two of those factors - competition and deregulation. 
House passage of the Tauzin-Dingell billin February 2002 spurred three 
major decisions by the FCC which created a favorable environment for 
broadband investment:  the cable modem decision of 2002, the Triennial 
Review Order of 2003, and, most recently, the DSL decision of 2005.  
Thus, the pro-competitive, deregulatory actions taken by this body and 
by the Commission have worked to encourage the first broadband 
technology shift.    
To best facilitate the second technology shift, Congress should 
continue its pro-competitive, deregulatory stance.  And indeed, 
Congress has already taken steps in this direction.  Most recently, 
with leadership from this Committee, Congress adopted a -hard date- 
for the DTV transitionwhich will release prime spectrum for the 
development of new wireless solutions.  Congress has also encouraged 
the FCC to facilitate competition in the wireline voice market by 
applying the light hand of regulation for VoIP, which will enable cable 
companies and new entrants to compete with incumbent telephone companies.
Promoting competition through deregulation in the video realm is the 
next logical step.  Video is the application driver for the deployment 
of next generation broadband because video uses an enormous amount of 
bandwidth.  Even with the latest compression techniques, a high 
definition television signal uses approximately 8 to 9 Mbps, several 
times faster than current-generation broadband.  Therefore, a public 
policy facilitating entry of new video providers will result in the 
deployment of more robust infrastructure, increased competition and 
consequent consumer benefit.  

Specific Problems With The Current Video Franchise Process

Problem 1:  Delay
Unfortunately, the current video franchise process does not facilitate 
the entry of new video providers in a timely fashion.  The franchise-
by-franchise negotiation process established under the old monopoly 
framework is simply too slow and unwieldy to encourage the speedy 
entry of new providers.  Verizon has filed documents with the FCC 
establishing that, to serve its entire target area with video service, 
it must negotiate between 2,000 and 3,500 franchises, excluding those 
in Texas.   Verizon began negotiations with 320 franchise authorities 
in November 2004 and, as of February 2005, had only 26 franchises other 
than those that were automatically issued in Texas.  For those 
franchises that have been successfully negotiated, negotiation time 
has ranged between two months and 17 months, with an average of 7.65 
months. The more important focus, however, are the negotiations in 
which Verizon has not been successful:  in over 80% of the franchise 
negotiations Verizon initiated in November 2004, a franchise still 
has not been granted.    
A similar situation has been experienced by BellSouth, which needs 
to negotiate 1,000 franchises.  As of last month, it had received 
only 20 franchises, requiring between 1.5 months and 32 months of 
negotiation time for each, at an average of 10 months. 
Moreover, this is not just a problem for the Regional Bell Operating 
Companies.  Smaller companies such as Knology, Grande Communications, 
Guadeloupe Valley Telecommunications Cooperative and the Merton Group 
have all reported a similarly protracted period of franchise 
negotiations, ranging between 9 months and 30 months.
The delayed entry of these competitive video providers results in 
less competition, less consumer welfare benefit, and delay in the 
second broadband technology shift.    

Problem 2:  Build Out
The second major problem with the current video franchise process is 
the practice of requiring new entrants to build out facilities beyond 
the area which they find economical.  For example, in the case of a 
telephone company entering the video market, video deployment 
logically follows the existing wire center footprint, which typically 
does not follow franchise area boundaries.  If a telephone company 
wants to offer video service throughout a wire center which covers, 
say, 30% of a local franchise area, the requirement to build out to 
the entire franchise area might well make it economically infeasible 
to provide video service at all within that franchise area.  
This is not merely a whimsical example.  We recently analyzed 
telephone company wire centers in Texas - where the characteristics 
of wire center deployment are typical of the nation on average - and 
found that only 3% of the wire centers completely overlap the 
geographic area of franchise areas.  
Therefore, the requirement that new entrants build out to an entire 
franchise area will result, in many instances, in potential 
competitors delaying or even abandoning plans to enter new video 
markets.  
Again, this is not just a Bell Company problem.  The National 
Telecommunications Cooperative Association has reported that many 
of its members, which tend to be small rural telephone companies, 
want to get into the cable business but have reported problems with 
local franchising authorities - particularly unreasonably short build 
out periods or requirements to build outside the carrier's own service 
territory. 
The solution, we believe, is to establish a franchise process which 
does not require such counterproductive build out requirements.  

Problem 3:  Extraneous Obligations
The third major problem with the current video franchise process is 
the imposition of extraneous obligations that exceed 1% of revenues.  
The Congress has already indicated its intent to limit payments for 
franchises by establishing in Title VI of the Communications Act that 
the 5% statutory franchise fee is a ceiling for payments -of any kind-. 
Yet, franchise authorities often seek payments that far exceed the 
5% fee by imposing requirements like the assumption of all Public, 
Education and Government (PEG) costs incurred by the incumbent cable 
operator over the entire span of its service, the installation of 
institutional networks (I-Nets), the requirement to bury aerial plant, 
the assumption of applications and acceptance fees, etc.  These 
extraneous requirements increase costs and discourage the investment 
in next-generation broadband capability thereby delaying the second 
technology shift.  The solution, we believe, is to prohibit the 
imposition of extraneous cost beyond 1% of gross revenues.  

Treatment of Existing Video Providers
We are also pleased that the draft bill would make its national 
franchise available to existing cable TV providers in competitive 
markets.  We think this is very important in order to encourage 
investment by all providers and to spur healthy competition.  

Municipal Broadband
To promote competition, Congress also should enable municipalities 
to deploy next generation broadband capability.  Particularly 
regarding fiber to the premises, municipalities were among the 
early leaders, even though recent court decisions have slowed 
deployments in a number of states.  Although we believe 
municipalities should consider all options before entering the 
telecom field, if municipal leaders feel that they must build 
their own networks in order to provide satisfactory broadband 
services to their constituents, they should have the freedom to 
make that decision.  The draft bill before you includes the 
necessary statutory clarification to allow municipal entry.  

Net Neutrality
Finally, Congress should avoid taking action which could, in 
fact, do harm.  This principle must be applied to the issue which 
has gained a tremendous amount of attention of late - the so-
called -net neutrality- issue.
Clearly, consumers buying broadband access from any provider should 
get the capacity they purchase, it should not be blocked, and they 
should be able to connect devices of their choosing, provided such 
devices do no harm to the network.   These principles were 
originally proposed by the High-Tech Broadband Coalition (HTBC), with 
the participation of TIA, and were adopted by the FCC last year.  TIA 
recently released its Broadband Internet Access Connectivity 
Principles, which reaffirms and adds to the abovementioned principles.  
We attach a copy hereto for your use.  
Similarly, unaffiliated applications developers, as consumers of 
bandwidth, should have rights, as well.  They, too, should be able to 
use the bandwidth they purchase without being blocked.  However, we 
have yet to see significant evidence of an actual problem.  Rather, 
net neutrality advocates appear to be concerned about potential 
misdeeds rather than actual misdeeds.  

 Conclusion 
We feel that it is crucial for the Congress to continue the string of 
pro-competitive, deregulatory federal policy actions that have 
occurred regarding telecommunications since 2002.  The draft 
legislation now under consideration by this Committee follows in that 
vein.  We believe this constitutes good public policy because it will: 
1)  help meet consumer demand for bandwidth; 2)  enhance consumer 
welfare through price competition; 3)  increase investment; 
4)  increase jobs; and 5)  enhance American competitiveness.  We are 
pleased to give it our support.  


 	Mr. Walden.  Thank you, Mr. Regan.  Mr. Misener, welcome.  We 
 	look forward to your comments today, sir.
Mr. Misener.  Thank you very much, Mr. Chairman, and thank you for 
inviting Amazon.com to testify.
	Mr. Chairman, the phone and cable companies are going to 
	fundamentally alter the Internet in America unless Congress 
	acts to stop them.  They have the market power, technical 
	means, and regulatory permission to control American 
	consumers' access to broadband Internet content and they have 
	announced their plans to do so.
	Mr. Chairman, as much as we wish it were otherwise, consumers 
	have little or no real choice of broadband Internet access.  
	For the foreseeable future, nearly all Americans will have
	two or fewer providers available, the phone company, the cable 
	company or both.  Unless Congress acts soon, American consumers 
	will receive artificially limited choice of broadband Internet 
	content.  Phone and cable companies plan to restrict American 
	consumers' access to such content based in large part on the 
	lucrative deals they intend to cut with third parties.
	As best as we can tell, the network operators plan to 
	artificially limit consumer choice of broadband Internet 
	content in three essential ways.  First, each network operator 
	has or is constructing a fast lane for their affiliated 
	broadband content provided by itself for its sister company, 
	and a slow lane for broadband Internet company provided by 
	others.  Second, the network operators intend to offer paid 
	prioritization, essentially a paid police escort for broadband 
	Internet content providers.  Their plan that as content enters 
	their slow lanes from an Internet or other network access 
	point, the speed with which this content transits their 
	network will be determined in part based on whether the content 
	owner paid for prioritization.  No one is suggesting that 
	certain types of services be denied prioritization, just like 
	certain kinds of road traffic like emergency services deserve 
	police escort, but such police escort should not be made 
	available for a fee, otherwise those unable to pay the fee 
	will always be stuck in traffic.  And third, network operators 
	intend to offer downstream content injection, essentially 
	local on ramps to content providers who are willing to pay.  
	This would enable content to be delivered from geographic 
	locations closer to consumers and provide better user 
	experiences.  Although content providers have no expectation 
	that such local on ramps must be provided for free, network 
	operators must not offer local on ramps on discriminatory 
	terms for affiliated traffic.
	Mr. Chairman, the bill appropriately addresses the preservation 
	of American consumers' longstanding freedom of choice of 
	Internet content in the context of national video franchising 
	relief.  Unfortunately, with all due respect, the bill's 
	provisions are wholly inadequate to preserve American consumers' 
	freedom of choice of Internet content.  These provisions would 
	not keep the network operators from cutting paid police escort 
	deals that would adversely affect the traffic of other content 
	providers who can't or won't pay and these provisions would not 
	keep the operators from insisting upon unreasonable or 
	discriminatory terms for leasing local on ramps.
	Mr. Chairman, we respectfully ask that Congress insert and 
	enact modest, but effective safeguards to reinstate limited 
	protections that the FCC recently abandoned and thereby 
	preserve American consumers' longstanding freedom of choice of 
	Internet content.  First, for traffic within the broadband 
	networks, Internet access lane police escort, a kind of 
	prioritization, may be provided only based on the kind of 
	traffic and whether the consumer has paid more for a somewhat 
	higher speed limit, and second, local on ramps into the 
	Internet access lane need not be free, but the road owner must 
	not charge unreasonable or discriminatory rates to favor their 
	own or some other's traffic.
	In conclusion, Mr. Chairman, the phone and cable companies are 
	going to fundamentally alter the Internet in America unless 
	Congress acts to stop them.  They have the market power, 
	technical means and regulatory permission to control American 
	consumers' access to broadband Internet content and they have 
	announced plans to do so.  I urge that you reject as inadequate 
	the provisions of the bill and instead insert and enact modest 
	but effective safeguards to preserve American consumers' 
	longstanding freedom of Internet content and choice.  Thank 
	you very much, and I look forward to your questions.
	[The prepared statement of Paul Misener follows:]

Prepared Statement of Paul Misener, Vice President for Global Public 
Policy, Amazon.com

	Good morning, Chairman Upton, Mr. Markey, and members of the 
	Subcommittee.  My name is Paul Misener.  I am Amazon.com's Vice 
	President for Global Public Policy.  Thank you very much for 
	inviting me to testify on this important matter.  I respectfully 
	request that my entire written statement be included in the 
	record.
	
I.	INTRODUCTION
	Mr. Chairman, the phone and cable companies are going to 
	fundamentally alter the Internet in America unless Congress 
	acts to stop them.  They have the market power, technical 
	means, and regulatory permission to control American consumers' 
	access to broadband Internet content, and they've announced 
	their plans to do so.
	American consumers have little or no real choice of broadband 
	Internet access and - unless Congress acts soon to reinstate 
	modest safeguards recently removed by the FCC - consumer choice 
	of broadband Internet content will be artificially limited.  
	In my time this morning, I will describe the market power of 
	network operators and the details of how they intend to 
	extend that market power to limit consumer choice of content, 
	such as movies, television, and music.  I then will describe 
	how the Committee Print (the "bill") fails to confront this 
	clear and present danger.  Lastly, I will propose modest but 
	effective safeguards to preserve American consumers' 
	longstanding freedom of Internet content choice.
	We simply ask that Congress keep the telco and cable operators 
	from taking their market power over broadband Internet access 
	and extending it to market power over broadband Internet 
	content.
	Amazon.com, an Internet-based retailer with tens of millions 
	of American customers, is involved in these discussions because 
	we want to ensure that our customers retain the unimpaired 
	ability to access the broadband Internet content of their
	choice, including that content available from Amazon.com.  
	Currently, consumers pay for Internet access, and have the 
	freedom to select lawful content from providers like Amazon, 
	who themselves have invested billions of dollars in content 
	and pay network operators millions of dollars a year for 
	Internet access.  We fear a circumstance in which broadband 
	network operators, among whom consumers have no real choice, 
	are permitted to prefer certain content and thereby limit 
	consumer access to other content.  Other large companies, 
	including eBay, Google, IAC/Interactive, Microsoft, and 
	Yahoo, join Amazon in expressing this concern.
	This is not just a big company concern, however.  Earlier this 
	month, six dozen entities, ranging from the AARP and the 
	Consumer Federation of America, to Educause and Internet2, 
	wrote to the full Energy and Commerce Committee to say that, 
	[w]hile it is appropriate for Congress to develop new 
	legislation to promote competition among broadband networks, 
	it must also ensure that consumers and providers continue to 
	have the right to use those networks to send and receive 
	content, and to use applications and services, without 
	interference by network operators.-  Amazon hopes that these 
	views and, most importantly to us, the interests of our 
	customers, will be thoroughly considered.

II.	CONSUMERS HAVE LITTLE OR NO REAL CHOICE OF BROADBAND INTERNET 
ACCESS
	Mr. Chairman, as much as we wish it were otherwise, consumers 
	have little or no real choice of broadband Internet access.  
	For the foreseeable future, nearly all Americans will have two 
	or fewer providers available:  the phone company, the cable 
	company, or both.  And, unfortunately, even the lucky consumers 
	for whom multiple service providers are available will continue 
	to face discouragingly high costs of switching among them.  
	Equipment swaps, inside wiring changes, technician visits, 
	long term contracts, and the bundling of multiple services all 
	contribute to these costs.
	Despite the common misconception that the Internet grew up in 
	an unregulated environment, its growth and success were due in 
	large measure to the extensive rules that governed its 
	infrastructure until last year when the FCC issued its final 
	wireline broadband order.  Although many of these rules were 
	outdated and worthy of deregulation, it makes sense to 
	completely abandon longstanding non-discrimination requirements 
	only if and when the market is truly competitive.  The FCC 
	believes that the market is competitive, but it is not.
	Indeed, the FCC's data on the competitive availability of 
	broadband access are fundamentally misleading.  These data, 
	which purport to show multiple broadband service providers in 
	many areas of the country, completely obscure the realities 
	faced by individual consumers.  Unfortunately, however, these 
	data also were the basis for the Commission's recent actions.
	In the first place, the data count as high-speed broadband any 
	services that deliver as little as 200 kbps in one direction.  
	Although this may have been a reasonable definition of 
	broadband a decade ago, it is preposterously slow today, 
	incapable of delivering even standard definition live video, 
	and one five-hundredth the speed being deployed to millions of 
	consumers in Korea and elsewhere.  Second, the geographic areas 
	analyzed are zip codes, not individual neighborhoods or 
	households.  So while there may be three or four true broadband 
	network operators (for example, two telcos and two cable 
	companies) serving small separate areas in a zip code, no one 
	consumer may have access to more than two of them (one telco 
	and one cable company).  And, third, the data include lines of 
	network operators that serve small businesses (for example, in 
	office parks) but not residential neighborhoods.
	The result of these misleading FCC data is that the amount of 
	broadband consumer choice is portrayed as wildly optimistic, 
	particularly when the aforementioned high switching costs are 
	considered.  If it really were easy for Americans to switch 
	among five, six, or more true broadband Internet access 
	providers, the market would be competitive and legislated 
	consumer safeguards would be unnecessary.
	What exists, unfortunately, is at best an oligopoly and, for 
	the vast majority of Americans, a duopoly of the local phone 
	and cable companies.  Widespread deployment of alternative 
	broadband technologies capable of high quality video remains a 
	distant hope, and the promise of inter-regional local phone 
	company competition is all but dead.  In such oligopolistic 
	conditions, firms easily can and do leave consumers with 
	fewer services, higher prices, or both.
	To be clear, we don't oppose network operators' entry into 
	competing businesses so long as they are not allowed to 
	leverage their market power over broadband Internet access to 
	favor these ancillary endeavors.  Also, we welcome broadband 
	network operators' innovations within the network.  With 
	Moore's Law at work, network operators ought to be able to 
	deploy innovative new technologies and services that, with 
	increasing efficiency, provide benefits to operators and users 
	alike.  Moreover, we don't begrudge the phone and cable 
	companies their current market power over the network.  
	Despite the longstanding desires and noble aspirations of 
	policy makers, we're stuck with this super-concentrated 
	broadband Internet access market for the foreseeable future.
	Lastly, although we oppose the collection of monopoly rents, 
	we certainly don't seek to deny network operators a healthy 
	return on their investments.  Content providers currently pay 
	network operators for the amount of connection capacity they 
	use, and network operators can charge consumers different 
	prices depending upon how much bandwidth they use.  This sort 
	of connectivity -tiering- makes perfect sense.  And, of course, 
	network operators will charge consumers for the provision of 
	any ancillary services, such as affiliated video content.
	What we seek is more modest, yet far more important:  We ask 
	that Congress keep the telco and cable operators from taking 
	their market power over broadband Internet access and extending 
	it to market power over broadband Internet content.

III.	CONSUMER CHOICE OF BROADBAND INTERNET CONTENT WILL BE LIMITED 
UNLESS CONGRESS ACTS
	Mr. Chairman, unless Congress acts soon, American consumers 
	will receive artificially limited choice of broadband Internet 
	content.  Phone and cable companies plan to restrict American 
	consumers' access to such content based in large part on 
	lucrative deals they intend to cut with third parties.  Such 
	business plans might be acceptable if consumers had meaningful 
	choice among network operators.  But, as described before, 
	consumers have no meaningful choice.
	In recent years, the FCC has reclassified broadband Internet 
	access by wireline service providers, both telco and cable.  
	Although the Commission adopted a policy statement that 
	confirms the agency's statutory authority and possible 
	intentions to act, the statement fails to address some likely 
	discriminatory behaviors and, in any case, the FCC decided to 
	make it unenforceable.  So, with the exception of weak merger 
	conditions that apply the FCC's policy statement to a few 
	network operators, and expires for no apparent reason in 
	18 months (the market certainly won't be competitive by then), 
	telcos and cable companies may artificially limit consumer 
	access to content at will.  Because consumer access to content 
	is in jeopardy, Congress needs to act.
  	Just as it is clear that the network operators have the market 
  	power to limit consumer choice of broadband Internet content, 
  	it has become equally clear that they fully intend to do so.  
  	Not only have the telcos and cable companies stridently and 
  	steadfastly opposed any meaningful network neutrality rules, 
  	their most senior executives have, over the past six months 
  	(noticeably after the FCC's final reclassification actions), 
  	issued refreshingly honest statements that reveal their plans 
  	for limiting consumer access to content.  Simply put, the 
  	network operators are planning to limit consumer choice of 
  	broadband Internet content based in part on deals they intend 
  	to strike with content providers.  Although the network 
  	operators have been somewhat less clear on exactly how they 
  	intend to limit consumer access, their FCC filings and public 
  	statements reveal that they plan to do so in three key ways.
	Before I describe the three key ways operators plan to limit 
	consumer access to content, please allow me to summarize their 
	technology plans.  Although there are many differences among 
	the technologies the duopoly network operators intend to use 
	(hybrid fiber-coax by the cable operators and either fiber-to-
	the-home or fiber-to-the-node plus DSL twisted pair by the 
	telco operators), all three technologies have been designed to 
	operate the same way in practice, with two downstream 
	components:  a very high capacity (-fast lane-) cable-like 
	private network component, and a much lower capacity (-slow 
	lane-) downstream broadband Internet access component.  The 
	fast lane will be operated as a closed network, while the slow 
	lane will be more (but, as it turns out, perhaps not entirely) 
	open.

	A.	Specific Network Operator Plans
	As best as we can tell, the network operators plan to
	artificially limit consumer choice of broadband Internet 
	content in three essential ways:  (1) a closed fast lane and 
	an open slow lane; (2) paid ï¿½police escort' within the slow 
	lane; and (3) preferential -local on-ramps- into the slow lane.
		1.	Closed Fast Lane and Open Slow Lane.  First, 
		as noted before, each network operator has or is 
		constructing a fast lane for their affiliated broadband 
		content provided by a sister company and a slow lane 
		for broadband Internet content provided by others.  
		The fast lane they reserve for themselves is a closed, 
		private network.  This has always been the case for 
		cable operators and, even for the telco operators 
		deploying broadband, make no mistake:  the overall 
		broadband pipes they're deploying are mostly just 
		another version of cable TV, not broadband Internet.  
		Consumers should recognize that despite the nearly 
		ubiquitous and puffy advertising, it's not about -your 
		world, delivered,- it's mostly about their world.
		2.	Paid Police Escort within the Slow Lane.  
		Second, the network operators intend to offer paid 
		prioritization (essentially a paid -police escort- in 
		the slow lane) for broadband Internet content providers. 
		Their plan is that, as content enters their slow lanes 
		from an Internet or other network access point, the 
		speed with which this content transits their network 
		will be determined, in part, based on whether the 
		content owner paid for prioritization.  The terms of 
		art the network operators use to describe this 
		prioritization include "quality of service" and 
		"tiering."  Each term is intentionally confusing.  No 
		one is suggesting that certain types of services be 
		denied prioritization, just like certain kinds of road 
		traffic, like emergency services, deserve police escort.  
		But such police escort should not be made available for 
		a fee; otherwise those unable to pay the fee will 
		always be stuck in traffic.  Put another way, to 
		prioritize some traffic is to degrade other traffic.  
		It's a zero-sum game at any bottleneck.  This fact is 
		intentionally obscured by network operators, who 
		incorrectly claim that they will not degrade anyone's 
		content.  Neutral prioritization (for example, network 
		management whereby all live video receives priority 
		above all text files) would be perfectly acceptable.  
		But for an operator to offer priority to the highest 
		bidder, the degradation of service to content providers 
		who can't or don't pay is unfair, at best.
	As should be obvious, small businesses will have a very hard 
	time innovating if they need to pay for ï¿½police escort' 
	prioritization to compete.  When some companies like mine have 
	noted this previously, some of the network operators respond 
	with something to the effect of -beware when big companies are 
	looking out for the interests of little ones.-  That response 
	seeks to change the subject and obscure three key points.  
	First, it doesn't change the underlying fact that small 
	entrepreneurs - facing a possible bidding war among big 
	companies - are going to be hurt unless Congress does something 
	now.  Second, many of the big companies noting this imminent 
	throttle on small company innovation were, indeed, innovative 
	small companies only just a few years ago.  And, third, on 
	behalf of our customers, we want to ensure that our 
	innovations - essentially new businesses operating in start-up 
	mode by our employees - are not hindered in the same way.  We 
	merely want, as Vint Cerf so clearly puts it, "to innovate 
	without permission" of the network operators.  Surely the 
	small start-up entrepreneurs of today want the same freedom to 
	invent.
		3.	Preferential Local On-Ramps into the Slow Lane.  
		Lastly, the network operators intend to offer 
		downstream content injection (essentially -local 
		on-ramps- for the broadband slow lane) to content 
		providers who are willing to pay.  This would enable 
		content to be delivered from geographic locations 
		closer to consumers and provide better user experiences. 
		Such local on-ramps already are provided in a 
		competitive access market by companies such as Akamai, 
		which has servers distributed throughout the United 
		States so that content can be delivered quickly to 
		consumers, rather than having to traverse great 
		distances on the Internet.  Although content providers 
		have no expectation that such local on-ramps must be 
		provided for free, network operators must not offer 
		local on-ramps on discriminatory terms for affiliated 
		traffic.

	B.	Network Operator Claims
	So how do the network operators discuss these plans?  They 
	obfuscate.  For example, most network operators say they 
	won't, quote, "block" websites.  This relatively new concession 
	is neither noble nor comforting and, in fact, it is quite 
	misleading.  While they may not actually block access to a 
	particular website, they easily could make that site's content 
	unusable, either by overly constraining capacity (making the 
	slow lane too slow); by providing prioritization only to those 
	willing and able to pay (the paid -police escorts-); or by 
	providing downstream injection (the local on-ramps) only on 
	unreasonable or discriminatory terms.  So it's a matter of 
	semantics:  they may never block content but still could make 
	it unusable.
	Other network operators say, dismissively, that this is a 
	"solution in search of a problem," or that policymakers should 
	wait for a problem to arise before acting.  But what further 
	proof is needed?  The time to act is now.  To ignore the 
	network operators' economic and technical power, their 
	strident and steadfast opposition to meaningful safeguards, 
	their bold announced intentions, and their increasingly clear 
	specific plans, is truly to turn a blind eye to an obvious 
	and serious threat to consumers.

IV.	THE BILL WOULD FAIL TO PRESERVE CONSUMER FREEDOM OF CHOICE OF 
INTERNET CONTENT
	Mr. Chairman, the bill appropriately addresses the 
	preservation of American consumers' longstanding freedom of 
	choice of Internet content in the context of national video 
	franchising relief.  The principal reason for granting 
	national video franchising relief is, of course, the 
	introduction of additional video competition for consumers.  
	It would be counterproductive, however, to facilitate the 
	delivery of content of one additional competitor (the phone 
	company), while limiting the availability of thousands of 
	other competitors via the Internet.  In the interests of 
	competition and consumer choice, therefore, video 
	franchising relief must not be granted without meaningful 
	broadband Internet content safeguards; otherwise, consumers 
	will receive less, not more, choice of content.
	Unfortunately, Mr. Chairman, and with all due respect, the 
	bill's provisions entitled -Enforcement of Broadband Policy 
	Statement- are wholly inadequate to preserve American 
	consumers' freedom of choice of Internet content.  The 
	underlying vague FCC statements of how consumers have various 
	entitlements need strengthening and elaboration, or otherwise 
	could result in invitations to litigation in which the courts, 
	not Congress, make critical policy.
	Most fundamentally, these provisions would not keep the 
	network operators from cutting "paid police escort" deals 
	that would adversely affect the traffic of other content 
	providers who can't or don't pay.  Entitling consumers to 
	"access" content and services does not clearly ensure that 
	such content or services will be usable if it gets 
	discriminatorily slowed in traffic.  And these provisions 
	would not keep the operators from insisting upon unreasonable 
	or discriminatory terms for leasing "local on-ramps."  
	Entitling consumers to competition among content and service 
	providers doesn't clearly prohibit network operators from 
	biasing the competition.
	In short, the most likely and dangerous anti-consumer
	discriminatory behaviors of broadband network operators would 
	not be thwarted by the provisions of the bill.
	Moreover, as I noted in my testimony before this Subcommittee 
	almost three years ago, and as the FCC recognized in its final 
	wireline broadband reclassification order last August, the 
	Commission does not need new authority to act in this area.  
	What the FCC needs is to be directed by Congress to use its 
	authority to prevent the network operators from artificially 
	constraining American consumers' choice of broadband Internet 
	content.  To deny the agency its general rulemaking and 
	enforcement authority with respect to even the modest 
	protections of the Commission's earlier policy statement 
	apparently disregards the operators' power and intentions.

V.	MODEST SAFEGUARDS WOULD PRESERVE CONSUMER FREEDOM OF CHOICE 
OF INTERNET CONTENT
	Mr. Chairman, we respectfully ask that, in lieu of the 
	current "Enforcement of Broadband Policy Statement" provisions 
	of the bill, Congress insert and enact modest but effective 
	safeguards to reinstate limited protections that the FCC 
	recently abandoned, and thereby preserve American consumers' 
	longstanding freedom of choice of Internet content.  Without 
	much effort, these safeguards can be narrowly drawn so that 
	operators' private networks are not invaded and so that 
	operators are appropriately compensated for the services 
	they provide.
	Two essential consumer safeguards we seek can be summarized 
	as follows:
Content transiting an operator's broadband Internet access network 
may be prioritized only on the basis of the type of content and the 
level of bandwidth purchased by the consumer, not ownership, source, 
or affiliation of the content.  (That is, for traffic within the 
broadband network's Internet access lane, "police escort" may be 
provided only based on the kind of traffic and whether the consumer 
has a paid more for a somewhat higher speed limit.)
The terms for local content injection must be reasonable and 
non-discriminatory; network operators must not be allowed to give 
preferential deals to affiliated or certain other content providers.  
(That is, -local on-ramps- into the Internet access lane need not be 
free, but the road owner must not charge unreasonable or discriminatory 
rates to favor their own or only some others' traffic.)
	With these two modest safeguards, appropriately drafted and 
	clarified, American consumers could be confident that their 
	longstanding choice of lawful Internet content will not be 
	limited by network operators.

VI.	CONCLUSION
	In conclusion, Mr. Chairman, the phone and cable companies 
	are going to fundamentally alter the Internet in America 
	unless Congress acts to stop them.  They have the market 
	power, technical means, and regulatory permission to control 
	American consumers' access to broadband Internet content, 
	and they've announced plans to do so.
	For the foreseeable future, American consumers will have 
	little or no real choice of broadband Internet access.  And 
	"unless Congress acts soon to reinstate modest and 
	longstanding consumer safeguards" consumer choice of 
	broadband Internet content will be artificially limited.  I 
	urge you and your colleagues to recognize that, despite how 
	we wish it were otherwise, the market for broadband Internet 
	access is not competitive and that the network operators fully 
	intend to extend their market power to limit consumer choice of 
	content.  I also urge that you reject as inadequate the 
	provisions of the bill and, instead, insert and enact modest 
	but effective safeguards to preserve American consumers' 
	longstanding freedom of Internet content choice.
	Thank you.  I look forward to your questions.

	Mr. Walden.  Thank you, Mr. Misener.  Thank you for your 
	testimony.  Mr. Keefe, welcome.  We look forward to your 
	comments, sir.
Mr. Keefe.  Thank you.  Good afternoon, Mr. Chairman.  My name is 
Dave Keefe.  I am the CEO and co-founder of Atlantic Broadband, which 
operates in six States.  I am also a board member of the American Cable 
Association which has members in every State. 
	Mr. Chairman, I would like to separate my remarks into two 
	distinct elements.  To start, and in regards to the committee 
	print, there are three issues I would like to address.  
	First, while we didn't ask Congress to alter the franchising 
	rules, we appreciate that the committee print takes on reform 
	in a technological and competitively neutral manner.  Second, 
	regarding net neutral, ACA member companies are examining the 
	effects of this language and will provide more specific 
	comment to the committee.  Finally, while competition is 
	something our members welcome and experience, we have concerns 
	with municipal overbills in communities where we have already 
	invested.  
	In short, ACA members view favorably the evolution of the 
	committee print.  We appreciate this draft does not include 
	the market test and uniform rate requirements that have been 
	rumored for inclusion.  Having said that, the American Cable 
	Association cannot support legislation that is silent on what 
	we consider to be one of the core issues still unaddressed, 
	the lack of competition in the video marketplace.  If Congress 
	wants to improve video services as stated here, we must address 
	the problems retransmission consent is causing.  
	Mr. Chairman, the ACA is not alone in recognizing the need for 
	retransmission consent reform.  In fact, Echostar, the 
	National Telecommunications Cooperative Association, OPASTCO, 
	the Broadband Service Providers Association and many other 
	interest groups have joined forces for reform.  Retransmission 
	consent rules were put into place to allow local broadcasters 
	to seek compensation from local cable operators for carriage 
	of the local broadcast signals.  This governmental grant was 
	provided to free, over-the-air broadcasters, in addition to 
	the grant of must carry.  The Government supplemented these 
	benefits by also granting broadcasters exclusivity rights in 
	any given broadcast market to ensure that a competing channel 
	in a neighboring market cannot be substituted.  These 
	anti-competitive rules guarantee the broadcaster is the sole 
	supplier of broadcast network in a given market with absolute 
	pricing power and the leverage to pull that broadcast signal 
	from the provider.  Is it any wonder that such entities like 
	ACA and Echostar, who see the problems retransmission consent 
	is creating for consumers, are calling for action while the 
	monopolists that benefit from the skewed regulatory scheme 
	are telling Congress that there isn't a problem.  Doesn't 
	that tell you something?
	So why must retransmission consent be eliminated?  Well, 
	first, it raises prices for programming without regard for 
	the value that the consumer may or may not put on it.  
	Second, it reduces diversity in programming by limiting most 
	new channels to those offered by conglomerates that can 
	compel carriage using their governmental-granted spectrum 
	signal leverage.  And third, it does not encourage localism 
	but it has become a means for extracting unjustified 
	non-market-based fees for the consumer.  Therefore, we urge 
	you to allow a competitive marketplace to replace the 
	regulatory scheme that today simply guarantees profits for 
	the lucky few companies that won the spectrum lottery from 
	the Government back in the ï¿½40s and the ï¿½50s.  Broadcasters 
	have attempted to discredit our concerns as misguided in 
	order to deflect any review of the real story which would 
	reveal the costs of this scheme to consumers.  We have put 
	some sunshine on this.  But I urge you not to be distracted 
	by their tactics.  Listen to what the broadcasters not only 
	are saying to Congress, but what they are telling Wall 
	Street.  CBS President and CEO Les Moonves was quoted 
	earlier in the month as bragging to Wall Street that 
	retransmission consent could, "amount to hundreds of millions 
	of dollars to the CBS network." Sinclair CEO David Smith 
	joyfully told an investors' conference earlier this month 
	that he plans to quadruple retrans revenue to $100 million 
	within three years, saying that "it is very clear to us, 
	everybody is going to pay; the only issue is what day and 
	how much."  It appears the networks view retransmission 
	consent as a means to extract hundreds of millions of 
	dollars from your constituents, our customers' pockets in 
	order to receive their free over-the-air signals.  Is that 
	really what you want to tell your constituents you let 
	happen during this debate?
	Mr. Chairman, many argue this topic is not appropriate for 
	this bill and it should just be swept under the rug, but 
	it is vitally important for you to consider fixing the 
	problems for all providers before it is too late, even of 
	the new entrants you aim to help with this bill.  Creating 
	a competitive pipe that dead ends at the doorstop of 
	monopoly providers will not provide your constituents a 
	better experience and will not allow me to innovate and 
	create products your constituents and our customers would 
	want us to offer.  I urge you now to act to stand with 
	cable operators, with family, faith-based organizations, 
	satellite companies, rural telephone companies, rural co-ops, 
	and consumer groups, a pretty unusual and broad alliance, I 
	might add, by unleashing the power of the marketplace for 
	your constituents and my customers.  Thanks.
	[The prepared statement of David J. Keefe follows:]

Prepared Statement of David J. Keefe, Chief Executive Officer, 
Atlantic Broadband, On Behalf Of American Cable Association

Thank you, Mr. Chairman.  My name is Dave Keefe, and I am the CEO 
of Atlantic Broadband and a board member of the American Cable 
Association.  My independent cable company, Atlantic Broadband, 
serves customers in six states.  ACA represents 1,100 smaller and 
medium-sized cable companies that primarily serve smaller markets 
and rural areas located in every state.
Our members proudly invest their own capital into their systems to 
provide many of the services today that your legislation intends to 
promote.  The advanced video and high-speed Internet access we offer 
in many of our more rural markets often represents the only option 
our customers have to avoid being on the losing end of the "digital 
divide."
I would like to separate my remarks today into two distinct elements.
First, I would like to briefly give ACA's commentary on the language 
currently in the Committee Print.
Second, and more importantly, I would like to mention the one issue 
that ACA strongly urges the Committee to include in the legislation 
if it wants to ensure that the stated goal of promoting and enhancing 
broadband development and the many exciting services it can bring 
with it is to be realized by the consumers in the smaller and rural 
markets we serve.
To start and in regards to the Committee Print, there are three 
issues I would like to address.
First, while we did not ask Congress to alter the franchising rules 
and have largely enjoyed a productive relationship with our local 
franchising authorities, we do not oppose the language in the 
Committee Print and appreciate the Committee Print taking on these 
reforms in a technology and competitively neutral manner.
Second, the language pertaining to -net neutrality-  is another 
issue the ACA has not pursued with Congress.  ACA member companies 
are still examining the effects of this language and I would ask if 
the Association be able to follow up with more specific comments 
soon.  In the interim and on behalf of virtually all of our ACA 
member companies that currently offer high-speed Internet service 
in smaller and rural markets, I do not today see this language as
posing monumental concerns at this time to ACA.
Lastly, while competition is something our members welcome and 
currently experience on multiple fronts, we do have concerns with 
municipal overbuild efforts in the communities we have already 
invested in and would urge the Committee to encourage municipalities 
to invest in areas that are currently unserved by existing providers.
In short, on behalf of the members of the American Cable Association, 
we do not oppose the Committee Print and appreciate the Chairman 
taking out of the Committee Print the market test based language we 
had seen in previous drafts.
Having said this, the American Cable Association cannot support 
legislation that is silent on what we consider to be the fundamental 
issue facing our members in rural and smaller markets across this 
country, specifically the market abuses we witness on a daily basis 
by the programmers as a result of retransmission consent rules and 
regulations that are just as ripe for reform as the franchising rules 
you have addressed in the Committee Print.  We are not alone in 
recognizing this need for retransmission consent reform.  In fact, 
EchoStar, the National Telecommunications Cooperative Association, 
OPASTCO, and the Broadband Service Providers Association have joined 
forces to push for reform.  The common link among these diverse voices 
is the fact that we are not vertically integrated and do not own 
programming. 
Retransmission Consent rules were put in place 14 years ago to allow 
the local broadcaster to seek compensation from the local cable operator 
for carriage of that local broadcast signal.  These rules were put into 
place as an alternative to broadcasters' must-carry rights which if 
exercised, obligate the pay-television provider to carry a broadcast 
station.  In addition to this guarantee of carriage - whether it be for 
free via must-carry or for a price via retransmission consent - the 
government also granted the broadcaster exclusivity rights in any given 
local broadcast market to ensure that a competing channel in a 
neighboring market cannot be substituted.
These anti-competitive rules allow the broadcaster to be the sole 
supplier of a broadcast network in a given market with absolute pricing 
power and the leverage to pull their broadcast signal from the provider.  
No wonder the NAB and the big networks are fighting to make no changes 
to the current retransmission consent regime! Over the past 14 years, 
the growing media consolidation we have seen in the broadcasting 
community has allowed for this regulatory regime to be manipulated to 
guarantee profit for the four network conglomerates and major broadcast 
groups.
Retransmission consent and exclusivity, coupled with vastly increasing 
media consolidation, provide the means today for broadcasters and 
networks to extract increased costs from consumers and to force carriage 
of unwanted bundles of programming that appeal only to the bottom line 
of advertisers.
The broadcasters argue that they do not "require" cable and satellite 
operators to carry channels they do not want.  Our members experience 
something quite different.  While they may not "require" us to take 
undesirable programming, they instead provide us with a Hobson's 
choice:  Either take the vast menu of other channels - no matter if 
they are objectionable, indecent, undesirable or invaluable to 
consumers in our markets - at increased prices and you can have our 
local affiliate at a reasonable price, OR don't take the whole menu 
and get gouged for the price of the stand-alone affiliate.
Clearly, these retransmission consent negotiations have evolved into 
simple exercises to increase the bottom line of the Big Four
television networks and the major broadcast groups:  if we choose to 
carry additional programming whether our subscribers find it offensive 
or not, the broadcaster will make their profit on additional ad 
revenue and additional programming fees for the unwanted programming.  
If we choose to answer our market's demands and carry only the 
broadcast channel, the broadcaster will extract their profit more 
directly from my customers and your constituents through direct cash 
payments.
The members of the American Cable Association are not asking for you 
to give us the broadcast signal for free.  Rather, we ask that 
Congress address our inability to  -negotiate- as a direct result of 
the market Congress dictated and designed.
Pay-television providers, particularly those in smaller and rural 
markets, have no leverage against these programming conglomerates.  We 
are offered a price and left with the option to take or leave it.
We are simply asking for your help to level the playing field so that a 
real economic market can dictate the true cost and value of programming.
Broadcasters have attempted to discredit our concerns as misguided.  
Naturally, as the beneficiaries of the current regime, they plead for 
you to make no changes to the current retransmission consent regime.  
However, I would urge you to not only listen to what the broadcasters 
say to Congress, but also look at what they tell Wall Street.
CBS President and CEO Les Moonves was quoted earlier this month as 
saying that retransmission consent negotiations could "amount to 
hundreds of millions of dollars in revenue to the CBS network."  
Sinclair CEO David Smith told an investor conference earlier this 
month that he plans to quadruple retrans revenue to $100 million 
within 3 years, saying that, -It's very clear to us everybody is 
going to pay; the only issue is what day and how much.- 
Again, we are not asking for the broadcast signal for free, but I do 
ask, how does a process that gives this much leverage to a few 
conglomerates to increase revenue at an alarming rate by pushing down 
costs and carriage to my members and your constituents promote 
localism?  How does this help control cable and satellite rates?  How 
does this give more flexibility and options to operators to deliver 
programming people want to see?
You may ask "why is this relevant to the Committee Print we examine 
today?"  I am here today to tell you that if the goal of this 
legislation is to inject competition in the marketplace in order to 
lower rates, you cannot inject competition only on the provider side 
of the equation.  You must also assess the competition in the video 
programming market.
If the government wants to uphold market exclusivity for the local 
broadcaster and allow him to seek compensation for his signal, fine.  
But Congress must also have a mechanism - whether it be 
accountability, transparency or competition for reigning in the 
egregious compensation sought by the broadcaster and paid for by the 
consumer.
The current archaic regulatory-governed marketplace for programming 
gives the video provider two options:  take it, or leave it.  If an 
operator decides to ï¿½leave it', he is abandoning localism. If he 
agrees to ï¿½take it', he is raising cable rates for his subscribers.
Video over IP, which is what your bill intends to promote, will be an 
exciting way that consumers will have choices and options they have 
never seen or experienced before.  Do you really want to promote the 
build out of these pipes and leave analog-world rules in place that 
limit the operators' flexibility in offering various packages of 
programming and impede the innovation we all envision from flowing 
through them?
I urge you to see the same problems that ACA, Echostar, the National 
Telecommunications Cooperative Association, OPASTCO and the Broadband 
Service Providers Association see.  Retransmission Consent, as 
currently constructed, is broken and must be fixed for this bill to 
achieve its stated goal.  All the competition and infrastructure in 
the world is useless if the content is controlled by a select few who 
can use an outdated regulatory scheme to extract profits at any rate 
they see fit.

	Mr. Walden.  Thank you, Mr. Keefe, and Mr. Fritz, it is good 
	to have you here and representing the broadcasters, somebody 
	named Fritz, it is unusual, even if it is a different 
	spelling.
Mr. Fritz.  If I could get his checks.  Thank you, Mr. Chairman, 
members of the subcommittee.  My name is Jerry Fritz.  I am the Senior 
Vice President for Legal and Strategic Affairs for Allbritton 
Communications Company.  Allbritton operates broadcast television 
stations in several markets including here in Washington, Lynchburg, 
Virginia, Harrisburg, Little Rock, Tulsa, Birmingham, and Charleston, 
South Carolina.  We also operate the 24-hour cable news channel here 
in the Washington market.
	I am testifying today on behalf of the National Association of 
	Broadcasters, of which I am a former board member.  The 
	television industry is pleased to be testifying about the 
	proposed legislation.  We applaud your effort to promote 
	competition in the video marketplace.  Greater competition 
	will benefit consumers and broadcasters.  We support the 
	legislation for this reason and because we understand that it 
	will preserve longstanding policies, including carriage and 
	retransmission consent for local broadcast signals and local 
	program exclusivity.
	Our comments on this bill are quite limited.  As you know, 
	broadcast TV comes to your constituents in several different 
	ways.  Some get it over the air.  Some get it via satellite.  
	Some get it from telephone companies and now even via cell 
	phones.  Most get it via cable.  Broadcast television channels 
	are the raw materials that cable and satellite operators 
	package with other channels to sell to your constituents.  This 
	programming costs broadcasters quite a bit of money to produce 
	or acquire and it has real value.  The question is, should 
	cable and satellite operators pay for that value?  This 
	question was answered 14 years ago and the answer was yes.
	Congress created the retransmission consent process in 1992 to 
	reorient a skewed marketplace that prevented broadcasters 
	from realizing that value.  Congress undertook the complex 
	task of leveling to permit a free market to flourish where 
	broadcasters and cable operators could bargain as equals over 
	the value of this raw material.  Then came John Malone, who 
	operated the largest group of cable systems in America.  
	Malone drew a line in the sand proclaiming that he would not 
	pay cash for broadcast channels.  The rest of the cable 
	industry fell in line and lockstep.  Broadcasters could play 
	chicken and risk losing access to 70 percent of their 
	customers or forego compensation, but Mr. Malone signaled that 
	he would pay for new value to systems, meaning new program 
	channels.  Up sprang local weather, sports, and regional news 
	channels.  Your television sets in Cannon, Rayburn, Longworth, 
	and Ford, and those on the Senate side as well, all carry news 
	channel 8.  That is the Allbritton 24-hour cable news channel 
	co-owned with WJLA that together produce over 16 and half hours 
	of live news per day.  That is over four times the average 
	news programming from a typical broadcast station.  That is 
	localism.  It is similar to broadcaster-owned news channels in 
	New England, Chicago, Columbus, Seattle, Orlando, Raleigh, 
	Austin, Albany, Memphis, even Boise, Idaho.  These remarkable 
	channels are fostered by our ability to negotiate with cable 
	operators.  Cable doesn't pay us for WJLA, but they do for 
	news channel 8.  We win, cable operators win, advertisers win.  
	Our local and regional government representatives win with 
	daily access to their constituents and most of all, viewers 
	win.  Why?  Because the retransmission consent regimen works.  
	The negotiations are hard and extremely complex.  Both sides 
	come to the table with value.  Cable and satellite together 
	have virtual monopoly gatekeeper control over 80 percent of 
	our viewers.  On the other hand, broadcasters have the most 
	desirable programming on cable.  We each need one another.  
The system is working just as Congress had envisioned it.  That was 
underscored just six months ago when Congress's experts, the FCC, 
reported that broadcasters and cable/satellite operators negotiate 
on a level playing field.  The Commission emphasized that the 
carefully balanced combination of copyright, exclusivity rules, and 
retransmission consent provides the benefits that Congress had 
foreseen.  It strongly opposed altering just the retransmission consent 
regimen without also addressing other intricate components of the 
balance.
	In this day of dramatic cable consolidation, it is important 
	that Congress not put its thumb on the scales of free and 
	balanced negotiations.  We do not need a new Federal mandate
	interfering with private negotiations.
	Mr. Chairman, broadcasters are happy to provide valuable 
	channels to cable and satellite packagers, but like the baker 
	or car manufacturer or homebuilder, our raw materials are 
	not free.  Tinkering with this free-market model that 
	demonstrably works will have severe unintended consequences 
	including the loss of programming like news channel 8.  This 
	will dramatically alter the fair allocation of value freely 
	negotiated.  Thank you.
	[The prepared statement of Jerry Fritz follows:]

Prepared Statement of Jerry Fritz, Senior Vice President for Legal 
and Strategic Affairs and General Counsel, Allbritton communications 
Company, On Behalf Of National Association of Broadcasters

Good morning Chairman Upton, Ranking Member Markey, and Members of 
the Subcommittee, my name is Jerry Fritz.  I am the Senior Vice 
President for Legal and Strategic Affairs for Allbritton 
Communications Company, the parent company of eight broadcast 
television stations including WJLA, Channel 7 here in Washington, DC, 
along with NewsChannel 8, the 24-hour cable news channel in 
Washington, Maryland and Virginia.  Today I am testifying on behalf 
of the National Association of Broadcasters (NAB), a trade association 
that advocates on behalf of more than 8,300 free, local radio and 
television stations and also broadcast networks before Congress, the 
Federal Communications Commission and the Courts.   
The television industry is pleased to be testifying about the proposed 
legislation, which is intended to promote competition in the 
multichannel video programming distribution (MVPD) market by 
encouraging new entrants.  Greater competition in local video 
programming markets across the country would benefit consumers and 
broadcasters by providing new delivery platforms and more choices.  
Broadcasters generally support streamlining the franchising process 
as a way to promote entry by new competitors, such as telephone 
companies, into the consolidated MVPD marketplace.  We support the 
proposed legislation on this basis, and on our understanding that it 
extends long-standing policies designed to promote localism, 
competition and diversity "including carriage and retransmission 
consent for local broadcast signals and local program exclusivity" 
equally to cable operators obtaining the new national franchise.  
Broadcasters understand that Congress' basic public policy goal in 
proposing this legislation is to permit a competitive video 
marketplace to function.  That same public policy goal was the basis 
for Congress' 1992 action creating a marketplace in which broadcasters 
have the opportunity to negotiate for compensation for MVPDs' use of 
their signals to attract paying subscribers.  As the Federal 
Communications Commission (FCC) recently found, this retransmission 
consent marketplace functions as Congress intended and benefits 
broadcasters, MVPDs and, most importantly, consumers.  Certain cable 
and satellite companies have recently asked Congress to interfere with 
these market-based negotiations for retransmission consent.  These 
demands for a federal mandate purely to benefit MVPD self-interests 
while usurping the free functioning of the market are fundamentally 
unfair, and pose a very real threat to the ability of broadcasters to 
provide locally oriented programming to communities throughout the 
country.

The Deployment of Competitive MVPD Services Will Benefit Consumers and 
Programming Providers, Including Broadcasters            
Television broadcasters support efforts to speed the deployment of new 
and innovative MVPD services.  Particularly in light of massive 
consolidation in the cable industry, a new video distribution platform 
offers great promise.  According to the FCC, the four largest MVPDs 
served 63 percent of all MVPD subscribers in 2005, up from 58 percent 
in 2004.  FCC, Twelfth Annual Report in MB Docket No. 05-255, FCC 
06-11 at ï¿½ 9 (rel. March 3, 2006).  MVPD services offered over the 
platforms of new competitors have the clear potential to introduce 
much needed competition into this regionally and nationally 
consolidated marketplace.  NAB sees this as a positive development 
for cable programming providers unaffiliated with cable operators, 
broadcasters and, most importantly, consumers.
Simply put, competition leads to better service at lower prices.  
For example, the Government Accountability Office (GAO) has found 
that competition to an incumbent cable operator from a wireline 
provider resulted in cable rates that were 15 percent lower than in 
markets without this competition.  GAO, Issues Related to Competition 
and Subscriber Rates in the Cable Television Industry, GAO-04-8 at 
9-11 (Oct. 2003).  In another study comparing markets with competition
from an overbuilder with those lacking such competition, GAO found 
that communities with overbuild competition experienced an average of 
23 percent lower rates for basic cable and higher quality service.  
GAO, Telecommunications: Wire-Based Competition Benefited Consumers 
in Selected Markets, GAO-04-241 (Feb. 2004).  Without question, 
consumers will benefit from the lower prices, improved quality of 
service, and increased choices that competition should bring.  
Video programming providers will 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 unaffiliated with cable operators with potential 
new outlets for reaching viewers and therefore with greater 
opportunities for success in the marketplace.  A number of cable 
programming networks and regional sports networks have previously 
expressed concern that large, consolidated cable operators are 
increasingly able to exclude independent programming networks from 
their systems and, thus, from the marketplace.  See, e.g., Twelfth 
Annual Report at ï¿½ï¿½ 173, 184.  The rapid deployment of a competitive 
video distribution platform will ameliorate such problems, thereby 
also benefiting consumers through additional, diverse programming 
options.      
Local television broadcasters will 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 must be regarded as positive.  
The development of another video distribution platform for carrying 
broadcast programming may also encourage the development of 
innovative digital television programming, including multicast and 
high definition (HD) programming.  If new MVPDs emerge as viable 
platforms for carrying local stations' HD and multicast programs, 
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 
diversity of programming, including local programming, from 
multicasting broadcast stations and unaffiliated cable programmers 
via a competitive MVPD.  
Consumers will also benefit from extending long-standing policies 
designed to promote localism, competition and diversity - including 
carriage and retransmission consent for local broadcast signals and 
local program exclusivity - equally to the new multichannel 
platforms.  Over the past decades, Congress and the FCC have adopted 
and maintained must-carry, retransmission consent and program 
exclusivity policies to preserve the viability of local television 
stations and their ability to serve their local communities with a 
high quality mix of network and local programming.  As Congress has 
recognized, and the Supreme Court has affirmed, the preservation of 
our system of free, over-the-air local broadcasting is "an important 
governmental interest."  Turner Broadcasting System, Inc. v. FCC, 
512 U.S. 622, 662-63 (1994).  
To maintain a level playing field, the well-established carriage, 
retransmission consent and program exclusivity policies applicable 
to traditional multichannel video providers should apply in a 
comparable manner to new competitors providing comparable video 
services that will be licensed under the proposed national franchise.  
Broadcasters therefore strongly support the extension of must-carry, 
retransmission consent and program exclusivity policies to MVPDs that 
will be franchised under this legislation.  We understand that the 
legislation does extend these policies, as the new Section 630(j) of 
the Communications Act states that only a very limited number of 
specified provisions -shall not apply to cable operators franchised 
under this section.-  Because must carry, retransmission and program 
exclusivity are not specified among these inapplicable provisions, 
they must accordingly apply to cable operators franchised under this 
new legislation.  

The Marketplace Congress Created for Retransmission Consent Works as 
Intended to the Benefit of MVPDs, Broadcasters and, Most Importantly, 
Consumers  
Because broadcasters support promotion of a more competitive video 
marketplace, we support Congress' 1992 action creating a marketplace 
in which broadcasters have the opportunity to negotiate for 
compensation for MVPDs' use of their signals to attract paying 
subscribers.  As the FCC recently concluded, retransmission consent 
has fulfilled Congress' purpose for enacting it and has benefited 
broadcasters, MVPDs and consumers alike.
Prior to the Cable Television Consumer Protection and Competition 
Act of 1992, cable operators were not required to seek the permission 
of a broadcaster before carrying its signal and were certainly not 
required to compensate the broadcaster for the value of its signal.  
At a time when cable systems had few channels and were limited to an 
antenna function of improving the reception of nearby broadcast 
signals, this lack of recognition for the rights broadcasters possess 
in their signals was less significant.  However, the video marketplace 
changed dramatically in the 1970s and 1980s.  Cable systems began to 
include not only local signals, but also distant broadcast signals and 
the programming of cable networks and premium services.  Cable systems 
started to compete with broadcasters for national and local advertising 
revenues, but were still allowed to use broadcasters' signals - without 
permission or compensation - to attract paying subscribers.  
By the early 1990s, Congress concluded that this failure to recognize 
broadcasters' rights in their signals had -created a distortion in the 
video marketplace.-  S. Rep. No. 92, 102d Cong., 1st Sess. at 35 (1991) 
(Senate Report).  Using the revenues they obtained from carrying 
broadcast signals, cable systems had supported the creation of cable 
programming and services and were able to sell advertising on these 
cable channels in competition with broadcasters.  Congress concluded 
that public policy should not support -a system under which 
broadcasters in effect subsidize the establishment of their chief 
competitors.-  Id.  Noting the continued popularity of broadcast 
programming, Congress also found that a very substantial portion of 
the fees that consumers pay to cable systems is attributable to the 
value they receive from watching broadcast signals.  Id.  To remedy 
this "distortion," Congress in the 1992 Cable Act gave broadcasters 
control over the use of their signals and permitted broadcasters to 
seek compensation from cable operators and other MVPDs for carriage 
of their signals.  See 47 U.S.C. ï¿½ 325.          
In establishing retransmission consent, Congress intended to create 
a "marketplace for the disposition of the rights to retransmit 
broadcast signals."  Senate Report at 36.  Congress stressed that it
did not intend "to dictate the outcome of the ensuing marketplace 
negotiations" between broadcasters and MVPDs.  Id.  Congress correctly 
foresaw that some broadcasters might determine that the benefits of 
carriage were sufficient compensation for the use of their signals by 
cable systems.  Id. at 35.  Some broadcasters would likely seek 
monetary compensation, while others, Congress explained, would 
"negotiate other issues with cable systems, such as joint marketing 
efforts, the opportunity to provide news inserts on cable channels, 
or the right to program an additional channel on a cable system."  
Id. at 36. 
Thus, even at the outset, Congress correctly recognized that, in 
marketplace negotiations between MVPDs and broadcasters, stations 
could appropriately seek a variety of types of compensation for the 
carriage of their signals, including cash or carriage of other 
programming.  And while retransmission consent does not guarantee 
that a broadcaster will receive fair compensation from an MVPD for 
retransmission of its signal, it does provide a broadcaster with an 
opportunity to negotiate for compensation. 

The FCC Recently Recommended that No Revisions Be Made to 
Retransmission Consent Policies
After some years' experience with retransmission consent, Congress 
in late 2004 asked the FCC to evaluate the relative success or 
failure of the marketplace created in 1992 for the rights to 
retransmit broadcast signals.  This evaluation shows that MVPDs' 
complaints about retransmission consent disadvantaging them in the 
marketplace or somehow harming competition are groundless.  In its 
September 2005 report to Congress about the impact of retransmission 
consent on competition in the video marketplace, the FCC concluded 
that the retransmission consent rules did not disadvantage MVPDs and 
have in fact fulfilled Congress' purposes for enacting them.  The 
FCC accordingly recommended no revisions to either statutory or 
regulatory provisions relating to retransmission consent.  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. 2005) (FCC Report).
In its report, the FCC concluded that local television broadcasters 
and MVPDs conduct retransmission consent negotiations on a "level 
playing field."  Id. at ï¿½ 44.  The FCC observed that the 
retransmission consent process provides incentives for both 
broadcasters and MVPDs to reach mutually beneficial arrangements 
and that both parties in fact benefit when carriage is arranged.  
Id.  Most importantly, according to the FCC, consumers benefit by 
having access to the broadcasters' programming carried via MVPDs.  
Id.  Overall, the retransmission consent rules have, as Congress 
intended, resulted in broadcasters being compensated for the 
retransmission of their stations by MVPDs and MVPDs obtaining the 
right to carry broadcast signals.  Id.
Given these conclusions, the FCC recommended no changes to current 
law providing for retransmission consent rights.  Moreover, the FCC 
explained that the retransmission consent rules are part of a 
"carefully balanced combination of laws and regulations governing 
carriage of television broadcast signals."  Id. at ï¿½ 45.  Thus, if 
Congress were to consider proposals to restrict broadcasters' 
retransmission consent compensation, the FCC cautioned that review 
of other rules, including must carry and copyright compulsory 
licensing, would be necessary as well "to maintain a proper 
balance."  Id. at ï¿½ï¿½ 33, 45.

MVPDs' Complaints about Retransmission Consent Are Groundless
Especially in light of this recent FCC report, the various 
repetitive complaints of MVPDs about the alleged unfairness of 
retransmission consent ring hollow.  For instance, some cable 
operators have complained about the retransmission consent fees 
purportedly extracted from them by broadcasters.  These complaints 
are especially puzzling because, as the FCC recently reported, 
cable operators have in fact consistently refused to pay cash for 
retransmission consent.  FCC Report at ï¿½ï¿½ 10, 35.  As a result, 
most retransmission consent agreements have involved "a cable 
operator providing in-kind consideration to the broadcaster," and 
cash is not yet "a principal form of consideration for 
retransmission consent."  Id. at ï¿½ 10.  This in-kind consideration 
has included the carriage of affiliated nonbroadcast channels or 
other consideration, such as the purchase of advertising time, 
cross-promotions and carriage of local news channels.  Id. at ï¿½ 35.
Given that cable companies have rarely paid cash for retransmission 
consent of local broadcast signals, this Committee should reject 
any MVPD claims that broadcasters' retransmission consent fee 
requests are unreasonable or are somehow the cause of cable rates 
that for years have increased at more than double the rate of 
inflation.  In fact, in late 2003, a GAO study did not find that 
retransmission consent has lead to higher cable rates.  See GAO, 
Issues Related to Competition and Subscriber Rates in the Cable 
Television Industry, GAO-04-8 at 28-29; 43-44 (Oct. 2003).  In 
contrast, the two GAO studies discussed above showed the lack of 
competition to cable operators, especially by wireline providers, 
to be a significant cause of higher cable rates.  
Complaints from MVPDs that some broadcasters attempt in 
retransmission consent negotiations to obtain carriage for 
additional programming channels are ironic, to say the least.  As 
the FCC found, broadcasters began to negotiate for carriage of 
additional program streams in direct response to cable operators' 
refusal to pay cash for retransmission consent of broadcast signals.  
FCC Report at ï¿½ 10.  Certainly any claims that cable operators somehow 
have been forced to carry unwanted programming as the result of 
retransmission consent are disingenuous.  Under the retransmission 
consent regime, no cable operator is compelled to carry any channel, 
whether a local broadcast channel or an allegedly "bundled" 
programming channel.  And if a cable operator prefers not to carry 
any channel beyond a broadcaster's local signal, cash alternatives 
are offered in retransmission consent negotiations.  For example, 
EchoStar recently completed negotiations with Hearst-Argyle Television 
for a cash-only deal at a marketplace rate.  Accordingly, there is no 
merit to allegations that broadcasters force MVPDs to carry indecent 
programming or that they limit MVPDs' ability to offer "family 
friendly" tiers.
Clearly, MVPDs want to have their retransmission cake and eat it too.  
In one breath, MVPDs complain that broadcasters are unreasonable in 
requesting cash payment for carriage of their local signals; in the 
next, they assert that negotiating for carriage of additional 
programming is also unreasonable.  In essence, MVPDs argue that 
retransmission consent is somehow inherently invalid because 
broadcasters should give their signals to MVPDs without compensation 
in any form.  But there is no legal, factual or policy reason that 
broadcasters - unique among programming suppliers - should be 
singled out not to receive compensation for the programming provided 
to MVPDs, especially given MVPDs' increasing competition with 
broadcasters for advertising revenue.  Indeed, when enacting 
retransmission consent, Congress noted that cable operators pay for 
the cable programming they offer to customers and that programming 
services originating on broadcast channels should be treated no 
differently.  Senate Report at 35.  
Some cable operators have also presented an inaccurate picture of 
the video marketplace by contending that, in rural areas and smaller 
markets, powerful broadcast companies have undue leverage in 
retransmission consent negotiations with local cable operators.  This 
is not the case.  The cable industry as a whole is concentrated 
nationally and clustered regionally and is dominated by a smaller and 
smaller number of larger and larger entities.  See Twelfth Annual 
Report at ï¿½ï¿½ 152, 154.  This consolidation will only continue 
assuming that the pending acquisition of Adelphia Communications by 
Comcast and Time Warner is approved.  In contrast, a strict FCC 
duopoly rule continues to prohibit broadcast television station 
combinations in medium and small markets.  In fact, a majority of 
cable subscribers in Designated Market Areas 100+ are served by one 
of the four largest cable MSOs, while only about three percent of the 
television stations in these markets are owned by one of the top ten 
television station groups.  Thus, in many instances in these 100+ 
markets, small broadcasters - which are facing severe financial 
pressures -- must deal with large nationally and regionally 
consolidated MVPDs in retransmission consent negotiations.  In sum, 
local broadcasters in medium and small markets do not possess 
unfair leverage over increasingly consolidated cable operators.
Indeed, in small and large markets alike, nationally and regionally 
consolidated MVPDs have been able to exert considerable market 
power in retransmission consent negotiations, at the expense of 
local broadcasters.  In actual retransmission consent agreements, 
broadcasters have frequently had to accept a number of egregious 
terms and conditions, especially with regard to digital carriage.
For example, it is not uncommon for MVPDs in retransmission 
agreements to refuse to carry a station's multicast digital signal 
that contains any religious programming and/or any programming that 
solicits contributions, such as telethons or other charitable 
fundraising programming.  MVPDs have refused to carry any digital 
multicast signal unless the channel is broadcasting 24 hours a day, 
seven days a week.  This requirement is very difficult for most 
digital stations (especially small market ones) to meet, and thereby 
makes it virtually impossible for many stations to obtain carriage 
of digital multicast signals.  Under other retransmission agreements, 
the MVPD agreed to carry only the high definition portion of a 
broadcast station's digital signal, and the carriage of any portion 
of the broadcaster's non-high definition digital signal (including 
even the primary digital signal) remained entirely at the discretion 
of the MVPD.  Other MVPDs have declined to carry the primary digital 
signals of non-big four network affiliated stations, unless these 
stations achieved certain viewer rankings in their local markets.  
Thus, the digital signals of many stations, including WB/UPN 
affiliates, Hispanic-oriented stations, religious stations and other 
independent stations, would not be carried by these MVPDs.  It seems 
highly unlikely that broadcasters would accept such disadvantageous 
provisions in retransmission agreements, unless the MVPDs had 
sufficient market power so as to insist on such provisions.           
In light of these real-world examples, Congress should skeptically 
view any complaints from MVPDs as to how they are at the mercy of 
powerful broadcasters in marketplace retransmission consent 
negotiations.  The current retransmission consent rules also already 
protect all MVPDs by imposing an affirmative obligation on 
broadcasters to negotiate in good faith and providing a mechanism to 
enforce this obligation.  See 47 C.F.R. ï¿½ 76.65.  In fact, EchoStar 
was the complainant in the only -good faith- case to be decided on 
the merits by the FCC.  In that case, the broadcaster was completely 
exonerated, while EchoStar was found to have abused the FCC's 
processes.  EchoStar Satellite Corp. v. Young Broadcasting, Inc., 16 
FCC Rcd 15070 (2001).  Unwarranted MVPD complaints about 
retransmission consent certainly cannot undermine the FCC's 
conclusion that MVPDs are not disadvantaged by the existing 
retransmission consent process.  See FCC Report at ï¿½ 44.
Some parties have suggested that Congress require baseball style 
arbitration for retransmission consent negotiations between 
broadcasters and MVPDs.  While this may seem like a plausible 
approach at first blush, when one considers the complexity of 
retransmission consent negotiations, it is clear that arbitration 
is not a viable option.  This arbitration suggestion implicitly 
assumes that retransmission consent negotiations are only about 
money, and that one should be able to choose the offer of one side 
or the other.  That is not the case.  In fact, these negotiations 
may involve such issues as program insertion options given to the 
MVPD, spot sales by the broadcaster, fiber runs between transmitter 
and headends, promotion spot guarantees, channel position and tier 
placement, DTV channel carriage, system expansion options, 
distribution and construction costs, studio/personnel/equipment 
sharing, electronic program guide placement and news insertion 
options, to name but a few.  Particularly when, as noted above, there 
is no evidence that the current free market negotiation process fails 
to serve the public, Congress should resist the call from MVPDs for a 
new federal mandate to interfere with the marketplace.      

Consumers Benefit from the Retransmission Consent Process
Finally, I would like to elaborate on the FCC's conclusion in its 
report that retransmission consent has benefited the viewing public, 
as well as broadcasters and MVPDs.  As the FCC specifically noted, 
broadcasters' ability to negotiate carriage of additional programming 
through retransmission consent benefits viewers by increasing 
consumers' access to programming, including local news channels.   See 
FCC Report at ï¿½ 35.  One excellent example is our company's News 
Channel 8 here in the Washington metropolitan area.  NewsChannel 8 is 
a local cable news network that has expanded as a result of 
retransmission consent negotiations over the carriage of Allbritton's 
television station WJLA-TV.  It provides local news, weather and 
public affairs programming, along with coverage of local public 
events.  Further, this programming is zoned separately to better 
serve viewers in Washington, D.C., the Maryland suburbs and Northern 
Virginia.
Similarly, Belo used retransmission consent to obtain carriage of its 
regional cable news channel NorthWest Cable News (NWCN) on cable 
systems serving over two million households in Washington, Oregon, 
Idaho, Montana, Alaska and California.  NWCN provides regional 
up-to-the minute news, weather, sports, entertainment and public 
affairs programming to viewers across the Northwest.  These efforts 
are coordinated with Belo's television stations in Seattle, 
Portland, Spokane and Boise.  
In addition to local news channels, broadcasters have used 
retransmission consent to provide local weather information on 
separate channels carried by cable systems.  For example, LIN 
Television provides these local weather channels in several markets, 
including ones with a history of frequent weather emergencies such 
as Indianapolis.  Broadcasters have moreover used retransmission 
consent negotiations to obtain carriage of their digital signals, 
thereby both benefiting viewers and, according to the FCC, furthering 
the digital transition.  See FCC Report at ï¿½ 45.
Not only has retransmission consent encouraged broadcasters to create 
and launch these local news and weather programming services for 
carriage on cable systems, retransmission consent promotes localism 
in other ways.  In particular, allowing local broadcasters to 
negotiate in the marketplace for compensation for the fair value of 
their signals helps local stations remain competitive in the face of 
competition from dozens, or even hundreds, of non-local cable and 
satellite channels in their markets.  It also at least potentially 
provides revenues to help stations better fulfill their obligations 
to serve their local communities and their viewers.

Congress Should Reject Demands to Interfere with Free Market 
Negotiations for Retransmission Consent
As my testimony makes clear, Congress intended in the 1992 Cable Act 
to give broadcasters the opportunity to negotiate in the marketplace 
for compensation from MVPDs retransmitting their signals.  The FCC 
concluded just last September that retransmission consent has 
fulfilled Congress' purposes for enacting it, and recommended no 
changes to either statutory or regulatory provisions relating to 
retransmission consent.  This Subcommittee should accept the FCC's 
conclusion and continue to let broadcasters and MVPDs negotiate in 
the marketplace for retransmission consent.  Especially in light of 
the FCC's conclusion that local broadcasters and MVPDs generally 
negotiate on a -level playing field,- FCC Report at ï¿½ 44, Congress 
has no basis for usurping the free functioning of the retransmission 
consent marketplace, as certain cable and satellite operators self-
interestedly urge.  Indeed, to do so would undermine the benefits 
that consumers gain from a well functioning retransmission consent 
market.  Thank you for your time and attention.


	Mr. Walden.  Thank you, Mr. Fritz.  We appreciate your 
	comments.  Mr. Citron, welcome.  We look forward to your 
	comments, sir. 
Mr. Citron.  Thank you, Mr. Chairman, and thank you for the 
opportunity to testify before your committee regarding your draft 
telecommunications legislation.  I will focus my remarks on the 
provisions that relate to emergency services.
	As policy makers, you should share our vision that every 
	American have access to E-911 regardless of whether they are 
	fixed, mobile, or voice over IP communications technology.  
	Vonage has no higher priority than delivering enhanced 911 to 
	our customers nationwide and your legislation would help 
	accelerate that objective.  To this end, we have partnered 
	with the FCC and public safety community officials to enable 
	more than one million Vonage lines with E-911.  This 
	represents over 70 percent of our customer base as we work 
	diligently to enable every customer with this service.  The 
	Vonage networks complete nearly 1,000 successful E-911 calls 
	every day.  In addition to dedicating significant resources 
	to our 911 effort, Vonage has also committed to the 
	collection and remittance of statewide 911 fees to fund the 
	build-out and upgrade of our nation's local public safety 
	answering points.  
Vonage's services are inherently nomadic, meaning that they are 
capable of operating over any broadband connection anywhere in the 
world.  For example, when Katrina devastated the Gulf Coast, New 
Orleans officials received their first call from President Bush on a 
Vonage phone, and as thousands of patients were pouring into Baton 
Rouge General Hospital, Vonage was the only long-distance line 
available for doctors and emergency medical personnel to use.  Our 
users can be in New Orleans one day and then the next day in Texas.  
This allows flexibility that fixed and mobile services just do not 
have.  This form of mobility presents enormous possibilities but also 
poses unique challenges to an antiquated 911 system, which was built 
to be fixed and local.  While we have retrofitted our service to be 
compatible with this 1960s-style network, we shouldn't limit our 
vision to the technology from the 1960s.  Nine-one-one should be the 
headlights, not the taillights, of the communications industry.
	The challenge to you as policy makers and regulators is to 
	enable all Americans with E-911.  We honor the countless hours 
	members of this committee, particularly Chairman Barton, 
	Ranking Member Dingell, Congressmen Upton, Pickering, Markey, 
	and Gordon have spent working on achieving this goal, and we 
	commend the FCC's endeavors in the scenario, but the FCC has 
	done everything within its statutory authority and now it is 
	time for Congress to act.  Congress should mandate E-911 to 
	all Americans regardless of whether it is fixed, mobile, or
	voice over IP.  Congress should provide liability parity for 
	all providers of emergency services.  Additionally, Congress 
	should require access to underlying 911 facilities, and 
	lastly, Congress should grant the FCC authority to create a 
	forward path for the industry.
	Chairman Barton's commitment to public safety and the FCC's 
	E-911 rules have helped Vonage with the fastest deployment of 
	nomadic 911 services in history.  Despite the FCC's support 
	and hard work over the last nine months, their powers are 
	limited to grant VOIP providers the liability parity that 
	public safety demands, nor can the agency grant access to 
	critical telecommunications elements that providers use to 
	offer E-911 to customers.  Your legislation would help 
	overcome the obstacles in gaining access to 911 facilities.  
	Nomadic voice over IP providers like Vonage need access to 
	all the 911 elements necessary to provide a comprehensive 
	solution and the committee print addresses this concern.  By 
	including the 911 access provision in the legislation, you 
	have ensured that the 911 system is held as a public trust, 
	not abused as a competitive lever.
	In addition to access challenges, liability issues continue 
	to impede progress in several key areas of the country.  Many 
	911 centers have refused to complete voice over IP emergency 
	calls without the same liability protections that exist for 
	wireline and wireless carriers.  I underscore public safety's 
	concerns about the lack of liability parity for voice over IP 
	emergency calls and request that the committee include this 
	going forward.  We second the National Emergency Numbers 
	Association's request that a provision for liability parity 
	be added to the bill.
	Finally, Congress should carefully contemplate a forward path 
	towards building out a flexible, more technologically advanced 
	911 network while preserving innovation and competition.  
	Further, it is good policy for lawmakers to guarantee that 
	every American has access to E-911.  Many Americans today 
	still have no access to E-911 at all on the traditional 
	wireline phone network.  We humbly suggest, as part of going 
	forward, review and oversight of our nation's communications 
	system that the leaders on this committee extend the E-911 
	capabilities to cover every American with a phone.
	I will conclude by noting that Vonage strongly supports the 
	interconnection provisions in the committee's draft and would 
	hope access to numbering resources would also be included.  
	In short, Vonage supports this legislation and I want to 
	thank the sponsors Chairman Barton, Congressmen Upton, 
	Pickering, and Rush, as well as Representatives Shimkus, 
	Eshoo, and Gordon for their leadership on 911 issues.  We 
	look forward to working with the committee towards its 
	passage.
	[The prepared statement of Jeffrey Citron follows:]

Prepared Statement of Jeffrey Citron, Chairman and Chief Strategist, 
Vonage

Mr. Chairman, thank you for the opportunity to testify before your 
committee regarding your draft telecommunications legislation.  I 
will focus my remarks on the provisions that relate to 911 services.  
Vonage has no higher priority than delivering Enhanced 911 to our 
customers nationwide, and this legislation would help accelerate 
that objective.  
Vonage currently delivers Enhanced 911 to more than one 
millionsubscriber lines, covering 70% of our base-and we are working 
diligently to get this service to 100% of our customers immediately. 
We consider ourselves a partner with public safety, and have not only 
dedicated significant resources to our 911 effort, but have committed 
to paying 911 fees on a statewide basis throughout the country.  
Chairman Martin's commitment to public safety and the FCC's E-911 
rules have helped Vonage with the fastest deployment of nomadic 911 
services in history.  Working with our partners at the FCC and the 
public safety community, the Vonage network completes nearly a 
thousand successful 911 calls every day.  
	Despite this progress, significant challenges remain and your 
	legislation would help overcome those obstacles.  I want to 
	make three points.  First, nomadic VoIP providers like Vonage 
	need access to all the 911 elements necessary to provide a 
	comprehensive solution; the Committee print addresses this 
	concern.  Second, many 911 centers refuse to complete VoIP 
	emergency calls without the same liability protections that 
	exist for wireline and wireless carriers; this provision 
	would need to be added to the bill.  Third, Congress should 
	carefully contemplate a forward path towards building out a 
	flexible, more technologically advanced 911 network while 
	preserving innovation and competition.   
	By including the 911 access provisions in this legislation, 
	you have ensured that the 911 system is held as a public 
	trust, not used as a competitive lever.   
	Next, I would underscore public safety's concerns about the 
	lack of liability parity for VoIP emergency calls and request 
	the Committee include this going forward.  Unlike wireline 
	and wireless carriers, VoIP providers do not have any 
	liability protection for completing 911 calls.  Unfortunately, 
	there are instances today where 911 centers will not accept 
	our emergency calls without such protection.   
	In 1999, this Committee and Congress passed the Wireless 
	Public Safety Act, granting wireless carriers equivalent 
	liability status to wireline services for 911 calls.  We would 
	simply ask that as this bill moves to the floor, the Committee 
	consider extending identical liability provisions to VoIP 
	providers and public safety centers.
Finally, I would like to comment on innovations in communications 
technology and how they interact with the nation's 911 system.  
Vonage offers a product that is inherently nomadic-meaning it's capable 
of operating over any broadband connection, anywhere in the world.  Our 
users can be in Texas one day and Tokyo the next.  This allows 
flexibility that fixed services and traditional phone services do not.  
	For example, when Katrina devastated the Gulf Coast, New Orleans 
	officials received their first call from President Bush on a 
	Vonage phone.  And as thousands of patients were coming into the 
	Baton Rouge General Hospital, Vonage was the only long distance 
	line available to doctors and emergency medical personnel.  
	This nomadic feature, which allows our service to work over any 
	high-speed Internet connection anywhere, is the only reason 
	these calls were able to get through.  
	This mobility also presents unique challenges to the 911 system 
	which was built to be fixed and local.  While we have 
	retrofitted our service to be compatible with a 911 network 
	based on 1968 technology, we shouldn't limit our vision to 
	1968.  911 should be the head lights, not the tail lights of 
	communications.  
	I would like to be clear that we support the FCC's efforts to 
	bring E-911 to VoIP services.  We embrace this obligation, and 
	Congress can help provide a forward path that is sensible for 
	public safety and moves us towards next generation 911 
	infrastructure.  
	Current E-911 regulations apply to Vonage but not to many other 
	VoIP providers. If E-911 services are not available to VoIP 
	providers in some markets, consumers in those markets will 
	still buy VoIP without E-911.  Vonage may not be the provider 
	for these customers, but another company will be, and the public
	safety community will be all the poorer for having countless 
	Americans without E-911 service.
	The challenge for this Congress is to enable Americans who want 
	VoIP to get those services with E-911 everywhere.
	I will conclude by noting that Vonage strongly supports the 
	interconnection provision in the Committee's draft, and would 
	hope access to numbers and number portability could be included 
	with that provision.  
	In short, Vonage supports this legislation and I want to thank 
	the sponsors-Chairman Barton, Congressmen Upton, Pickering, and 
	Rush-as well as Representatives Shimkus, Eshoo, and Gordon for 
	their leadership on 911 issues.   We look forward to working 
	with the Committee towards its passage.

	Mr. Walden.  Thank you, Mr. Citron, and thank you to all of our 
	panelists today.  I am going to start off with a question for 
	Mr. Fellman.  Mr. Fellman, I heard pretty quickly from my cities
	and their mayors when the first versions of this bill came 
	forward and they expressed concerns about control over their 
	rights-of-way, about the franchise fees, about the PEG channels, 
	and additional fees.  From your perspective as a mayor, does 
	this bill take care or satisfy the issues relative to the 
	rights-of-way in your community's ability to control the 
	rights-of-way?
	Mr. Fellman.  Thank you, Mr. Chairman.  Not completely.  One of 
	our biggest concerns is it that disputes over interpretation of 
	what local governments might do go to the FCC.  I will tell you 
	that that in and of itself will probably be cost-prohibitive to 
	the point of precluding many, especially small and medium-sized 
	communities, from ever holding firm to their position of what 
	it means to enforce local rights-of-way.  Presently we go to 
	local court if there is a dispute, whether it is a 
	telecommunications company, a contractor of another kind, a 
	utility company like gas or electric.  Those issues are dealt 
	with in local courts.  The FCC should not be made the 
	rights-of-way judge and jury for local governments in this 
	Nation.
	Mr. Walden.  All right.  The franchise fee issue, it is five 
	percent, up to five percent gross revenues plus one percent and 
	some guarantee on PEG channels.  Now, I know that is not 
	everything every city wants but what on average do cities get 
	today in terms of franchise fees?  What percent of gross 
	revenues?
	Mr. Fellman.  In my experience, the majority of local 
	franchising authorities get five percent of gross revenues.  
	Now, gross revenues is defined differently in different areas 
	so it is five percent of what piece of the pie.
	Mr. Walden.  Sure, and the you get nothing from satellite 
	providers, correct?
	Mr. Fellman.  That is correct.
	Mr. Walden.  Now, if we open up the market with technology 
	expanding, it is perhaps likely that some of these folks who 
	would come into our cities offering video services for the 
	first time might take market share away from, say, satellite, 
	correct?  And so your cities might actually get additional 
	revenue.  It is conceivable, at least, that there would be 
	additional providers in your communities providing service for 
	which you would get revenue, correct?
	Mr. Fellman.  That is theoretically possible, yes.
	Mr. Walden.  All right.  Okay.  Mr. Misener, I want to go to 
	you on net neutrality issues and perhaps get some feedback 
	from Mr. McSlarrow and Mr. McCormick regarding this issue about 
	the pipe and whether or not the providers, like Mr. Misener is 
	representing, are going to get sidetracked in this information 
	age.  I know it is a very complex and controversial issue.  I 
	would like to get your response to his comments and then maybe 
	his response to your comments.  You heard his testimony, 
	Mr. McSlarrow.
	Mr. McSlarrow.  I think the one issue we can set aside is 
	whether or not net neutrality means something about whether or 
	not people are going to get access blocked.  I think we can 
	set that aside.  That hasn't happened and it really has been 
	a red herring.  We are now engaged in a much more complex 
	conversation about what the future of the network architecture 
	looks like.  I think our fundamental position is not that 
	there isn't good faith behind concerns expressed.  It is that 
	it does not reflect the reality of the world we live in.  
	Four years ago, people made these same arguments and in that 
	time, Google has grown to $100 billion market cap.  The 
	providers like Amazon.com and Google are flourishing.  So in 
	the absence of an identifiable problem, recognizing the 
	networks that are in place today, that will ultimately be 
	upgraded and who knows what the architecture looks like 
	will cost vast sums of money and investment.  Why would we 
	risk freezing innovation and investment in place today?
	Mr. Walden.  All right.  I am going to run out of time.  
	Mr. Misener, very quickly.
	Mr. Misener.  Yes.  Thank you, Mr. Chairman.  Mr. McSlarrow 
	said earlier today that this would be regulating the Internet 
	for the first time, and I think this is probably one of the 
	most fundamental misconceptions here.  The Internet has 
	been regulated in the sense of non-discrimination since 
	its inception until last year, and so the fact that bad 
	things haven't happened yet is largely as a result of 
	regulation that was in place, and that has recently been 
	removed by the FCC.  Furthermore, a couple of the telcos 
	are under merger restrictions that actually prevent them 
	from, at least for the next 18 months, engaging in this kind 
	of activity.  Lastly, I think it is a big misconception.  
	Mr. McCormick has said that they will not block, impair, or 
	degrade content.  Well, they also say simultaneously that they 
	want to provide quality of service for a fee.  These are 
	fundamentally inconsistent statements.  It is impossible to 
	provide quality of service for a fee without degrading some 
	content.
	Mr. Walden.  All right.  My time has expired.  Mr. Markey. 
	Mr. Markey.  Thank you.  Mr. McSlarrow, following up on this 
	line of questioning, whether or not this point made by 
	Mr. Walden is a red herring or not, I was dismayed to read 
	recently that cable operators are refusing ads from AT&T and 
	Verizon about video choice.  In the Washington Post, it quotes a 
	Time Warner spokesman as saying Coke doesn't promote Pepsi; 
	McDonald's doesn't promote Burger King; NBC doesn't promote ABC.  
	Now, Mr. McCormick, the article also states that AT&T has filed 
	a complaint with the FCC on this matter.  Now, Mr. McCormick, 
	what if the cable guys were told they had to accept the ads but 
	they then aired them on the least watched channel at 3:00 a.m. 
	in the morning?  Would that be acceptable to you?  In other 
	words, they are not blocking the ad, they are just burying it.  
	So I find it more than a little ironic that you guys are fighting 
	over something akin to what you claim you won't do to Internet 
	companies with respect to broadband services.  You are having 
	that fight right now.  
	So let us go over to you, Mr. Citron.  You are an Internet-based 
	entrepreneur.  You are akin to Pepsi to their collective Coke.  
	Are you reassured by the network neutrality section of this 
	bill or do you think we need clear anti-discriminatory rules?
	Mr. Citron.  Sir, I think the bill makes a first good attempt 
	at providing a framework to move forward, and I commend 
	everyone's efforts towards that.
	Mr. Markey.  Are you satisfied, Mr. Citron?
	Mr. Citron.  I think there is more that we can do to protect 
	consumers to ensure that they make--
	Mr. Markey.  On a scale to ten, how far have they gone?
	Mr. Citron.  They are on the right path but not there yet. 
	Mr. Markey.  Where do you put it on a scale to ten?
	Mr. Citron.  Oh, probably somewhere about midway along the way.
	Mr. Markey.  Around what?
	Mr. Citron.  They are probably at the midpoint.
	Mr. Markey.  Mr. Misener, you are here representing Google, 
	eBay, Amazon, all the companies that are leading edge of 
	revolutionizing our economy.  Would you be satisfied if there 
	were non-opposable standards to protect your companies and 
	thousands of others?
	Mr. Misener.  Absolutely not.  I think frankly if you were to 
	give me the one to ten scale, I would give it about a negative 
	three, and the reason it is negative is it actually takes away 
	authority from the FCC.  It seems to give regulatory authority 
	to the Commission when, in fact, the Commission already has 
	the authority, but it actually takes away the rulemaking and 
	some of the enforcement powers that the Commission currently 
	has.  So frankly, in many respects, it is a step backwards.
	Mr. Markey.  I thank you, Mr. Misener.  Now, so we already see 
	the problem over here and these are the giants fighting, not 
	some kid in a garage that is going to be seeking extra access.  
	Now, Mr. McCormick, you want a deregulatory environment--I 
	applaud you for that--for video services.  You want to get 
	out there and you want to get the Government out of the way 
	so that the phone companies and the cable industry can just 
	go at it in the free market and so I assume that that means 
	you will be supporting my amendment to eliminate program 
	access rights for national cable franchises for the telephone 
	industry, because why should the cable industry have to give 
	you their programming, their HBOs, their CNNs in the market.  
	They made the investments.  Why should the Government force 
	them to share it with you, Mr. McCormick?  Why should the 
	Government make--why are you asking us to force the cable 
	industry to share their programming with you?
	Mr. McCormick.  I think the issue, Mr. Markey, is this 
	committee has long taken an interest in new entrants.
	Mr. Markey.  Well, I agree with that but again, we are 
	talking about new entrants for net neutrality, okay?
	Mr. McCormick.  I understand.
	Mr. Markey.  And that is an interest you don't seem to really 
	share with us, so what I am saying is, I am going to move back 
	the other way and say you guys should develop your own 
	programming.
	Mr. McCormick.  No, no.  I think that what we have said with 
	regard to net neutrality is that we will not block, impair, 
	or degrade, that we will provide full access to our networks.  
	We want to have the same thing with regard to--
	Mr. Markey.  Do you want program access principles or program 
	access rules, because I am going to change it to principles 
	and then leave it to the FCC to enforce.  Is that acceptable 
	to you?
	Mr. McCormick.  Well, if the FCC said that it has the ability 
	to enforce any problems that would arise--
	Mr. Markey.  No, what I am saying is, I am going to change the 
	program access rules to principles and then you will have to 
	go to the FCC and get them to enforce the principles.  Would 
	that be acceptable to you?
	Mr. McCormick.  Well--
	Mr. Markey.  Yes or no, Mr. McCormick.  Yes or no.
	Mr. McCormick.  We think that the existing law with regard to 
	programming--
	Mr. Markey.  You want rules.  You want to be protected by 
	rules.  Mr. McSlarrow, can you pledge today that cable 
	operators who obtain national licenses under the bill will not 
	withdraw service from any geographic area they are currently 
	serving?
	Mr. McSlarrow.  No. 
	Mr. Markey.  Can you pledge that service and technology 
	upgrades will occur uniformly as they do under local 
	franchising agreements when operators get national licenses?
	Mr. McSlarrow.  No.
	Mr. Markey.  Can you pledge today that cable operators won't 
	cross-subsidize lower rates to consumers in the part of town 
	where the Bell company has shown up with higher rates in the 
	part of town where the Bells have chosen not compete in?
	Mr. McSlarrow.  No.
	Mr. Markey.  Mr. McSlarrow, the final question, the remedy 
	to this is making sure that Mr. McCormick's companies compete 
	over the same service area that you compete over, then the 
	marketplace will force consumer-friendly activity, not just 
	on the rich side of town but on the poor side of town, 
	because otherwise my fear is, and I think it is going to 
	happen, is that the poor side of town is going to wind up 
	subsidizing the rich side of town where the competition is 
	going to break out.  You don't need a business degree from 
	Harvard Business School to know that that is the plan.  Thank 
	you, Mr. Chairman.
	Mr. Upton.  Thank you.  Sorry that I had to step away for a 
	few minutes.  I appreciate that your testimony was submitted 
	in advance so I could look at it last night.  
	Mayor Fellman, I appreciate your recognition in your testimony 
	that, -this draft is more responsive to those issues you raised 
	with the committee in the past and your willingness to 
	continue to work with the committee going forward.-  I thank 
	you for that and I look forward to those discussions.  
	In your testimony you suggested that the existing franchise 
	process is not a barrier to entry.  However, according to the 
	Verizon February 13, 2006, filing with the FCC, during 2005 
	Verizon conducted franchise negotiations with approximately 
	320 LFAs.  Verizon only obtained 44 franchises as of year end 
	2005 and it obtained seven additional franchises at the time 
	of their filing.  Of those 51 total franchises, 29 were in 
	Texas and most of those were obtained after the new statewide 
	franchise law was enacted.  Excluding the ones from Texas, 
	it has often taken Verizon between six and 12 months and 
	sometimes more to obtain the franchises that it has been 
	awarded.  Verizon estimates that it will need between 2,000 
	and 3,500 franchises, all told and that obviously is just 
	them.  
We know that there are other phone companies seeking to offer new 
video services.  We also know that there are approximately 33,000 
local franchises across the country.  I want to read some excerpts 
from some interesting commentary regarding the existing local 
franchise process, and I quote:  -Rapid technological advancements 
of our day require changes to be made to the current regulatory 
environment with regard to video service providers.  The current 
regulatory barriers have not kept up with the latest technology, 
and have the effect of slowing down or preventing the American 
consumer from either enjoying new technologies or receiving a 
better price on existing services which would result from the 
increased marketplace competition.  The current franchise system 
inhibits additional companies who might be subject to it from 
entering the marketplace and investing in infrastructure when they 
are challenged by the expense and difficulty of attaining enough 
market share to recoup costs.  The effect of all this in trying to 
apply a 20-plus-year-old business model on today's technologies 
cities is denying their consumers choice, unnecessarily raising 
the cost of such services, and stifling innovation.  Competition 
has been stifled in the world of video services due to government
regulation.-  
	Now, my question is a multiple choice.  Who do you think 
	made that statement?  Do you think it was a CEO of a Bell, 
	cable company, Progress and Freedom Foundation, or a mayor 
	of a large town in California?  I think you know:  D, the 
	mayor.  The mayor of the city of Anaheim, a city of 
	345,000 folks, 47 percent Latino, 36 percent white, 
	12 percent Asian, two percent black with 73 percent of its 
	population having an income less than $75,000, and those 
	excerpts are directly from the reply comments which the 
	mayor filed with the FCC in its ongoing review of the 
	local franchise process, and I will put that entire part 
	of that into the record.  
	My point in raising this is to suggest that it is not 
	just Chairman Barton, Mr. Rush, Mr. Pickering, myself, 
	and others sitting here in D.C. who believe that the 
	local franchise process is standing in the way of
	competition for the consumer.  At least the mayor of an 
	ethnically and income-diverse city in California appears 
	to concur as well.  And as I said in my opening statement, 
	the bill balances the need, I think, for reforming the 
	franchise process while preserving, in the national 
	franchise, critical important elements of the legacy 
	local franchise framework, namely the control over 
	right-of-way, which we had conferred with before with the 
	cities, the franchise fee of up to five percent of the 
	gross with an additional one percent for the carriage of 
	PEG, something that I support, and as well on top of the 
	five percent franchise fee.  I look forward to your input 
	and your comments as this process unfolds, and I don't 
	know if you would like to comment on what we tried to get 
	the mayor to come today and sit next to you but it didn't
	happen.
	[The information follows:]


Before the 
FEDERAL COMMUNICATIONS COMMISSION
Washington, DC 20554

_______________________________________

In the Matter of	)
Implementation of Section 621(a)(1) of	)
the Cable Communications Policy Act of 1984	)		
MB Docket No. 05-311
as amended by the Cable Television Consumer	)
Protection and Competition Act of 1992	)
_______________________________________


REPLY COMMENTS OF THE CITY OF ANAHEIM

	These Comments are filed by City of Anaheim. As the 
	Federal Communications Commission (FCC) reviews 
	implementation of the Federal Communications Act, we are 
	confident the Commission will hear from many cities as 
	well as associations representing municipalities.  No 
	doubt, many of these entities will appeal to the FCC to 
	maintain the status quo.  We believe you will find 
	Anaheim's comments different from most municipalities.
Anaheim believes that the rapid technological advancements of 
our day require changes to be made to the current regulatory 
environment with regard to video service providers.  The current 
regulatory barriers have not kept up with the latest technology, 
and have the effect of slowing down or preventing the American 
consumer from either enjoying new technologies or receiving a 
better price on existing services which would result from the 
increased marketplace competition. Anaheim has set out a broader 
policy of dismantling outdated barriers to greater consumer 
choice, with the goal of eliminating franchise fees on these 
services as a relic of the past.  In support of this belief, we 
wish to inform the Commission about the status of video 
franchising in our community and discuss why federal reform is 
needed.

Community Information
	Anaheim is a city with a population of 345,317.  Since 
	1979, the city of Anaheim has had a franchise agreement 
	with various cable service providers, the most recent of 
	which is with Adelphia Communications, and which in turn 
	is being transferred to Time-Warner Communications.  
	In order to increase competition and provider greater 
	options to our residents, the City recently reached an 
	agreement with AT&T for the delivery of Internet Protocol 
	Television (IPTV) to Anaheim residents.  We believe this 
	agreement is a model that shows the kind of local 
	flexibility that an updated regulatory climate would 
	further foster.
As you would expect, AT&T agreed to offset the city's cost of 
impact on local infrastructure.  They do not escape any obligation 
to work with us scheduling or paying for the impact on streets as 
network enhancements are made under our roads.  However, AT&T 
will not be required to pay the city a franchise fee, nor will 
the company be promised, either in writing on in effect, an 
exclusive right to provide Anaheim residents with IPTV.  
The agreement between AT&T and Anaheim currently includes 
provisions to:  (1) reimburse Anaheim for any direct costs 
associated with the project; (2) provide continued access to 
Channel 3, our local Public/Education/Government (PEG) channel; 
and (3) maintain consistency with the City's aesthetics, 
standards and procedures.  This agreement is consistent with our 
overall policy described earlier.

Introduction and Summary
 	The City of Anaheim has expressed its commitment to 
 	provide innovative and robust communication options to 
 	its residents and businesses and to foster competition and 
 	capabilities, all without cost or liability to the City.  
 	City leaders do not believe that government should determine 
 	whether residents receive video content through established 
 	cable providers, growing competition from satellite 
 	television, or new concepts coming on line like internet 
 	protocol television (IPTV), or technologies on the horizon 
 	like Wi-Fi delivery of video content.  Anaheim is supportive 
 	of maintaining open market competition in which any 
 	franchise fee is eliminated for consumers and a variety of 
 	service providers have an opportunity to earn customer 
 	support.  
The current franchise system inhibits additional companies who might 
be subject to it from entering the marketplace and investing in 
infrastructure when they are challenged by the expense and 
difficulty of attaining enough market share to recoup costs.  At the 
same time, companies that are clearly exempt from franchising, like 
satellite providers, flourish.  
Franchise fees and many elements within franchise agreements, 
therefore, are merely an artificial intrusion by government into the 
consumer marketplace.  Attempts to apply franchise fees and 
agreements to some providers, while exempting others, effectively 
eschews the market.  Therefore, eliminating these fees and 
impediments, Anaheim contends, will allow equitable competition 
amongst the variety of video service providers.  In this way, and 
without local government interference, the various systems compete 
in price, quality and quantity and consumers decide which service 
provider they prefer. 
It is perhaps most instructive to examine the arguments made by 
supporters of the status quo and the reasons why these arguments are 
not valid, in Anaheim's experience.

Argument 1:  -Local Governments Need Protection From Fiscal Harm-

	Many cities argue, essentially, that because they have 
	gotten used to the revenue from franchise fees, they should 
	be entitled to continue to receive them forever more, whether 
	the original justification for the fee still makes sense.  
	Historically, cities and cable providers have had a mutual 
	interest in franchise agreements.  Cities wanted systems 
	built out to their whole territory, and the cable provider 
	wanted protection of the investment they made for citywide 
	deployment in order to have time to recoup their costs.   
However, technology has passed these days by.  Some video providers, 
by the nature of their technology, can bypass these outmoded models.  
For other potential providers, the ability to provide video 
entertainment content over their systems is a byproduct of upgrades 
they plan to make to their systems whereby they may provide other 
data services to potential customers.  And, if they foreswore the 
ability to provide video entertainment (which would only hurt 
consumers) over their systems, municipalities would not have the 
ability to impose franchises.
The effect of all this in trying to apply a twenty-plus year old 
business model on today's technologies, cities are denying their 
consumers choice, unnecessarily raising the costs of such 
services, and stifling innovation.
	In the past, local governments have been accustomed to 
	using money brought in from the franchise fee to help pay 
	for basic city services, such as public safety, traffic 
	management and street and sidewalk preservation.  But, in 
	fact, cities have created an unfair tax on cable companies 
	and limited competition in a fast-paced, competitive 
	marketplace.  Furthermore, many cities have used these fees 
	to fund essential municipal services unrelated to cable, 
	although the fees simply are not a long-term stable source 
	of revenue for cities.  As an example, just look at the 
	emergence of satellite services.  This, a non-taxed cable 
	competitor, has increasingly taken a significant share of 
	the entertainment market. As cable companies have lost 
	customers to other competing entities, cities have seen a 
	corresponding drop in the revenues that come from cable 
	franchise fees.  It is a weak fiscal model that subjects 
	core municipal services such as public safety on a 
	dwindling source of revenue, regulated by sources out of 
	direct control of that municipality.
	We question why new companies that can provide alternative 
	video services to their residents outside the original 
	intent of franchising should have to pay a franchise fee? 
	If a company that wishes to do business in Anaheim does 
	need to access government-owned land (for example, to 
	upgrade networks under city roads, streets and other 
	right-of-way), we already have the rights and protections 
	to ensure that the company offsets any costs associated 
	with the use (as we have done with AT&T's IPTV service 
	agreement).  

Argument 2: - Local Governments Need to Protect Their Control of 
Rights-of-Way-

	Some local government officials want the federal government 
	to protect their right to charge impact fees and rent for 
	the use of public right-of-ways.  That is well and good, 
	but the concept of a franchise agreement is not necessary 
	for a city to maintain control of their infrastructure.
In Anaheim's agreement with AT&T, they complied with existing state 
law, and with our local requests, for control over our right of 
way.  They are to schedule any such digging up and replacement of 
right of way with us, and pay for the full cost, all without a 
franchise agreement.
If a company needs to use public-owned land for their service 
delivery infrastructure, it makes sense for the local government 
to negotiate a fee for the use of that property.  However, local 
governments shouldn't have the power to prevent, effectively, 
other companies from entering in the marketplace.  By the same 
token, if a private company wants to give away phone service in 
exchange for the use of publicly owned infrastructure, that 
shouldn't be prohibited.  But local governments shouldn't be 
allowed to demand that a single company provide an array of free 
services in exchange for an effective monopolistic franchise, all 
the while preventing other companies from providing competitive 
service for their residents.
	If a local government rents property or grants the use 
	of a right-of-way, it is logical that representatives 
	would ask for compensation as part of contract 
	negotiations.  Alternatively, city leaders can decide 
	that they don't need to charge any fees for use, as the 
	City of Anaheim did with our recent agreement with 
	Earthlink, our Wi-Fi provider.  Earthlink will be 
	installing a Wi-Fi network throughout Anaheim, using 
	city-owned streetlights and other infrastructure.  The 
	city is not charging a franchise fee, but Earthlink is 
	not guaranteed a monopoly on wireless service in 
	Anaheim.  They simply contracted with the city to 
	install a citywide system because our city council 
	wanted to be sure that our residents could enjoy the 
	benefits of wireless communication throughout our 
	community.
	In their responsibility as city leaders, local 
	government representatives have an obligation to manage 
	their city's rights of way in order to achieve the best 
	benefit to residents and maximize public value.  In 
	addition, local governments are responsible for providing 
	access to rights of way within their control in a fair 
	and even-handed manner.  In so doing, governments ensure 
	that existing users of the rights of way are not unduly 
	inconvenienced.  We believe that when public rights of 
	ways are responsibly managed, residents receive the best 
	possible benefit, which includes receiving the most 
	up-to-date technology with the greatest variety of 
	choice.   All of these goals can be achieved without 
	strict franchising. 

Argument 3:  -Local Governments Need the Authority of Franchise 
Agreements-

	It has been argued that cities need the power of franchise 
	agreements in order to provide education and government 
	access channels, local emergency alerts and other public 
	services.  Some believe that private companies should be 
	required to give free services for police and fire 
	stations, schools and libraries in exchange for doing 
	business with and in their city.  But we don't believe 
	that free services like these justifies allowing a single 
	company to have a de facto monopoly on the market.  Again 
	with our IPTV agreement, we were able to request of AT&T 
	that they carry our local Channel 3 (PEG), which they 
	happily agreed to, without a franchise.

Conclusions 
	In the 21st century, technology is changing on nearly a 
	day-to-day basis.  To the extent that government needs to 
	be involved in the marketplace in order to be responsible 
	stewards of the public interest, government leaders at 
	all levels should be working to create a regulatory 
	environment that can nimbly respond to market changes 
	that result from some new exciting technological 
	breakthrough.  In the past, competition has been stifled 
	in the world of video services due to government 
	regulations.  
	The City of Anaheim respectfully requests that the FCC 
	implement reforms that allow the American consumer to 
	benefit from increased competition in the marketplace, 
	enjoying new delivery methods and potentially lower costs 
	for those services.  We invite the commissioners to visit 
	our city and see a local community that is able to deliver 
	top-quality video service without a franchise fee, giving 
	its residents real choice in the marketplace.
 
					Respectfully submitted,
					City of Anaheim

				By: 	Mayor Curt Pringle
					200 S. Anaheim Blvd., #733
					Anaheim, CA  92805

cc:	John Norton
	Andrew Long

	
 Mr. Fellman.  Well, I am sorry he wasn't able to come, but-
	Mr. Upton.  Just hit your--
	Mr. Fellman.  It is on.  Mr. Chairman, thank you.  If I 
	could respond briefly to just generally two of the points 
	that you made, Verizon and Anaheim.  
	Here is what you didn't mention that was part of Verizon's 
	comments.  In that same FCC proceeding, Verizon indicated 
	that its dedication to getting franchises was demonstrated 
	by the fact that it had 50 employees dedicated to getting 
	franchises throughout this country--50.  Now, if you added 
	up the number of lobbyists that Verizon has in every State 
	where it was trying to end franchising and in this Congress, 
	I would venture to say it is a few more than 50, and if they 
	were dedicating appropriate resources to getting franchises, 
	they would be deployed in half the places they are 
	complaining about not having franchises now, and as a 
	specific example, over four months ago Verizon went to the 
	city of Bellevue, Washington, and said we want to get 
	permits to start putting in our fiber network and do our 
	upgrade, and the city of Bellevue, Washington, said let us 
	start your franchise negotiations now because we want to be 
	able to have those video services, we want you to be ready to 
	be deployed when you are done putting in your upgrades.  They 
	said no, we are not ready to do that yet, and in the FCC 
	filing that I made on behalf of a number of my clients, 
	because outside of my service as mayor I do work for local 
	governments in communications issues, there is documentation, 
	the correspondence between Bellevue and Verizon, showing that 
	the city is asking, can we start this franchise negotiation 
	and Verizon saying no, we are not ready yet.  
	So I think there is another side of the story about how much 
	some of these telephone companies are really interested in 
	pursuing franchises.  I think with respect to my colleague in 
	Anaheim, Mr. Chairman, what works in Anaheim doesn't 
	necessarily work in Arvada or New York or Detroit or any other 
	city in the country, and that is why localism is important.  If 
	Mayor Pringle thinks that franchising is a bad thing in 
	Anaheim, then God bless him.  Let them do it that way in 
	Anaheim and maybe it will work for his citizens, maybe it 
	won't, but he is accountable to his constituents and his city 
	council is accountable to his constituents by what they do in 
	Anaheim just as I am accountable to mine, and Congress should 
	not impose on local governments that accountability that we 
	have to stand for.
	Mr. Upton.  I appreciate your comments.  I yield for questions 
	to Mr. Boucher.
	Mr. Boucher.  Thank you, Mr. Chairman, and I want to extend my 
	thanks also to the members of this panel for your participation 
	in our deliberations today.  We appreciate your comments.  
	Mayor Fellman, let me pick up with you.  There is a provision 
	of the bill which I was pleased to note that says that 
	municipalities may not be prohibited by the States in which 
	they reside from offering commercial telecommunications 
	services for their residents.  I am sure you have examined 
	that provision.  It is fairly succinct.  Do you find it to 
	be sufficient?
	Mr. Fellman.  Yes, I do. 
	Mr. Boucher.  And you are not recommending any changes to 
	that provision to this committee?
	Mr. Fellman.  Again, it is a short provision and we have 
	just seen the bill for a few days as many as you have.  I 
	don't know if we might suggest tweaking it a little bit but 
	the concept of Congress saying that local government should 
	have the right to provide these services if they decide at 
	the local level that that is what their citizens--
	Mr. Boucher.  And the bill does carry forward that 
	permissible--
	Mr. Fellman.  I read it that way, yes.
	Mr. Boucher.  Good.  Mr. Regan, would you like to comment 
	on that?  I know your company strongly supports the 
	opportunity for local governments to be involved in these 
	endeavors.
	Mr. Regan.  Yes, sir, Mr. Boucher.  The municipalities were 
	clearly the leaders and early adopters to our technology.  
	Frankly, the fact that they have been blocked by the courts 
	has really troubled us so our reading of that statute is, 
	it does correct the situation and that municipalities, if 
	that is enacted, will be able to enter back into the market. 
	Thank you.
	Mr. Boucher.  Thank you very much.  Well, hopefully with that
	ringing endorsement from two sources, we can put this issue 
	to bed.  Mr. Misener, let me turn to you.  I would welcome 
	your comment on something that concerns me very much, and I 
	made reference to this in my opening statement, and that is, 
	the new business plan that has been announced by some 
	last-mile providers that essentially would create something 
	new on the Internet, and that is two lanes over the last mile, 
	one fast, one slow.  Access to the fast lane would be provided 
	to content originators, the Internet-based companies 
	operating out on the edge of the network, who could afford to 
	pay for that access, and then everyone else would be relegated 
	to the Internet slow lane.  My concern is that this kind of 
	structure, which is dramatically different from the way the 
	Internet grew up, will have a significant adverse effect on 
	innovation because the startup company won't have the money 
	to pay those last-mile fast-lane fees.  Is this a valid 
	concern?
	Mr. Misener.  Yes, sir, Mr. Boucher, it is.  I have spoken 
	about this on other occasions and I have had folks from the 
	network operators come up and say well, it is kind of a scary 
	thing when a big company like yours is purporting to talk on 
	behalf of small innovators.  Two thoughts.  One is, it doesn't 
	change the underlying truth.  The small innovators won't be 
	able to afford the paid police escort to get the 
	prioritization and, therefore, they won't be able to serve 
	consumers in the same way the big companies are.  Second, it 
	wasn't long ago that we were a small company.  Just a decade 
	ago we were a small, little innovative company, and if you 
	count profitability, it was even less long ago that we were 
	small.  Lastly, our companies also operate innovative new 
	services.  We want to be able to develop new services for 
	our customers and we want to be in a position to offer 
	those without having to get permission from the network 
	operators, so it really will affect innovation at the edge.
Mr. Boucher.  All right.  Thank you very much.  What I see as a 
simple solution for this is a basic provision that says that if 
prioritization is necessary, if fast-lane treatment is required in 
order to deliver video effectively or some other high data rate 
application like gaming perhaps effectively, then that is fine.  
That prioritization could take place.  However, if the last-mile 
provider is going to prioritize bits of any kind, it should offer 
that same prioritized access for bits of a similar kind that 
originate from some unaffiliated content provider.  That is a 
simple solution.  Does that solution make sense?  Would that 
effectively address the problem?
	Mr. Misener.  Yes, it would for content as it transits the 
	network operator's network.  In many respects, many video 
	kinds of services, high bandwidth services require local 
	injection.  That is to say, instead of traversing the entire 
	Internet, it behooves the service providers to inject it 
	locally.  We are not asking for that for free.  To be very 
	clear, we are willing to pay for that, but on reasonable 
	and non-discriminatory terms that don't favor the network 
	operator's preferred to affiliated content provider.
	Mr. Boucher.  All right.  Thank you very much.  Let me 
	simply ask Mr. McCormick if he wants to take a moment to 
	respond.  I know your companies have a somewhat different 
	view.
	Mr. McCormick.  Yes, thank you, Congressman.  Congressman 
	Boucher, we have said that our companies will not block, 
	impair, or degrade access to the Internet.  We will not 
	alter, modify, or change the data that consumers want.  We 
	have a hundred-year history of delivering you where you 
	want to go.  If you want to call Macy's, we--
	Mr. Boucher.  Mr. McCormick, we understand that, and that 
	is really not the issue.  The issue is something that is 
	very new and different that would not involve blocking or 
	degrading.  It would simply be creating two lanes of 
	access, charging for one, leaving the slow lane for everyone 
	who can't afford those fees, and the concern is really what 
	that kind of structure would do to innovation.
	Mr. McCormick.  Well, let me respond specifically to that 
	because, yes, I think the CEOs of each of our companies have 
	responded in a very thoughtful, candid, and forthcoming way 
	to those concerns. Most recently, yesterday there was an 
	article by Mr. Notabart in the Wall Street Journal.  I think 
	the answer is this.  Companies like Amazon, Google and 
	others, consumers will continue to access those Web sites 
	the way that they always have, but similarly, we have a 
	history in this country where companies, governments 
	municipal governments, Federal government, banks, health care 
	facilities come to us and they ask for us to construct for 
	them using Internet protocol, networks that are secure that 
	can maintain privacy, particularly with regard to healthcare 
	data and financial data.  These networks ride over the same 
	Internet links as do the Google and the Amazon access, and 
	those networks are called virtual private networks.  We 
	provide them today, we will provide them in the future, and 
	if a company like Netflix or Disney wants to come and say 
	will you construct for us a virtual private network that 
	will be secure, that will have certain quality assurances, 
	that will have privacy, just as we do that today, we should 
	be free to do that in the future--
	Mr. Boucher.  And the effect on innovation.  This really is 
	the question.  How do you respond to the concern that the 
	startup won't be able to afford that prioritized service and 
	therefore can't compete?
	Mr. McCormick.  Well, the answer to that question is this, 
	that if we are talking about the startups along the lines of 
	when Amazon was a startup or Google was a startup where 
	consumers need to have access to those sites, there will be 
	no blocking or impairing of that.
	Mr. Boucher.  Mr. Chairman, I thank the gentleman and I 
	yield back my time.  Thank you.
	Mr. Upton.  Mr. Barton.
	Chairman Barton.  I thank you, Mr. Chairman.  I thank you for 
	holding the hearing.  I thank our witnesses for being here.  
	This end of the panel has kind of been left out of these 
	questions so far, so I am going to start with our friend from 
	Vonage.  I want just a concise verbal definition, and then I 
	want you to let your lawyers work on it and send it to us in 
	writing.  I want a definition of net neutrality from each of 
	you gentlemen, and I wish I could put cotton in your ears so 
	you couldn't hear everybody else, but let us start with you, 
	Mr. Citron.  What is your definition of net neutrality?
	Mr. Citron.  I think the hallmark of net neutrality is about 
	consumer protection.  It is the consumer's right to bring 
	any device they want to the network, it is the consumer's 
	right to get any access to any lawful content that exists on 
	the network, the consumer's right that should there be two 
	lanes and it should be consumers who choose which lane they 
	get to go ride in, not some other operator's right to go 
	ahead and decide for them.  Those would be the hallmarks of 
	net neutrality and the final point being that not one 
	service, not one BIT should be treated favorably at the 
	penalty or expense of another one.
	Chairman Barton.  Mr. Fritz, I know NAB has just stayed up 
	nights worrying about net neutrality.
	Mr. Fritz.  Fortunately, we have no position and no 
	definition.
	Chairman Barton.  Okay.  Mr. Keefe?
	Mr. Keefe.  Same for me, Congressman.  We are, you know, 
	studying the issues and don't have a position yet.  I mean, 
	we don't practice any blocking in our company.  I can tell 
	you that.
	Chairman Barton.  No, I just want a definition.  I am not 
	alleging wrongdoing.  I just want to see if we can get a 
	definition.  I know Mr. Misener has got a definition.
	Mr. Misener.  Yes, sir.  I think fundamentally it is 
	preventing the extension of market power over the network 
	to market power over content.  I have tried to be super 
	specific on the things that they are planning and how we 
	would get at them and legislation so we could narrowly 
	tailor it, but at base it is taking the market power that 
	they have got over the network and extending it to market 
	power over content, in a way that has never been possible 
	before, because of law, regulation and frankly because of 
	technology. That has changed.
	Chairman Barton.  All right.  Mr. Regan?
	Mr. Regan.  You got a minute?
	Chairman Barton.  I got about 30 seconds.
	Mr. Regan.  Our points are all consumer related.  Basically 
	bottom line is, consumers ought to be able to get access to 
	the bandwidth they buy.  They ought to be able to run the 
	applications that they choose to run within the constraints 
	of the plan they buy.  They ought to be able to attach 
	devices to their Internet connection that don't cause harm 
	to the network, and they ought to be able to go on the 
	Internet where they want to go within the bounds of their 
	service plan.
	Chairman Barton.  All right.  Mr. McSlarrow--notice nobody 
	has given anywhere close to the same definition yet.  Just 
	an editorial comment.
	Mr. McSlarrow.  Mr. Chairman, I guess my definition is that 
	it is the first time regulation of the Internet will freeze 
	investment and innovation.
	Chairman Barton.  That is your definition?
	Mr. McSlarrow.  That is my definition.
	Chairman Barton.  Okay.
	Mr. McSlarrow.  Otherwise I will have to turn to lawyers.
	Chairman Barton.  Mr. McCormick?
	Mr. McCormick.  Mr. Chairman, I would agree.  We are dealing 
	with what-if questions and hypotheticals, so I don't have an 
	effective definition of what is meant by--
	Chairman Barton.  Well, that is an honest answer, and our 
	friend, the mayor.
	Mr. Fellman.  Mr. Chairman, the associations that I am 
	representing have not come up with their own definition and 
	some have not even taken a position on net neutrality, but my 
	personal feeling, and in an effort to allow you to say that at 
	least some of us are in agreement is, I tend to agree with 
	Mr. Citron.
	Chairman Barton.  All right.  Now, I want the members of the 
	committee to notice, we got one, two, three, four, five, 
	six, seven, eight gentlemen that represent some of the 
	largest trade groups and some of the brightest minds in the 
	country, and not one of them really gave a--Mr. Misener 
	probably came closer than anybody.  I would have to give 
	him the best grade.  Mr. McSlarrow gave a very negative 
	kind of anti-definition, and we are tried up in knots in 
	this bill potentially over something that we don't even 
	yet have a universally recognized definition of what it is.  
Now, the bill before us definitely gives the FCC the authority to 
enforce net neutrality, whatever it is.  If anybody violates the 
principles that the FCC has put out on net neutrality, whoever 
that villain is, the bill explicitly gives the FCC the authority, 
on a case-by-case basis, to punish the villain.  Now, since we 
don't even know what it is, I think that is a pretty good start.  
Now, I understand the concerns and all that, but I think the 
committee print is headed in the right direction on net neutrality.  
I next want to ask Mr. McSlarrow under current law, are cable 
operators subject to price regulation in any locality that they 
serve?
	Mr. McSlarrow.  Yes, under current law, what is called a 
	uniform price requirement throughout an entire franchise 
	area for the basic package, so the 10 or 12 channels, not 
	the full-blown expanded basic but for the basic package 
	is in place until that market is deemed subject to, quote, 
	unquote, -effective competition.-  That happens in two 
	instances under current law, satellite companies reach 
	30 percent market penetration or upon entry of a telephone 
	company.
	Chairman Barton.  But you get to set your price.  You can 
	set it.  It has to be the same for everybody in the 
	territory that you are serving.  Is that correct?
	Mr. McSlarrow.  For the basic package, it is still a 
	regulated rate.
	Chairman Barton.  And who--
	Mr. McSlarrow.  Congress deregulated the--
	Chairman Barton.  Who regulates that rate?
	Mr. McSlarrow.  The localities under a formula I think 
	derived from the FCC, but it is delegated to them.
	Chairman Barton.  Okay.  Well, my time is expired, 
	Mr. Chairman.  I have about five other questions.  I do 
	want a written definition from each of you on net 
	neutrality, if your trade group doesn't have a dog in the 
	hunt, just send us a letter that says we don't have a dog 
	in the hunt and we won't worry with you.
	Mr. Upton.  Mr. Stupak.
	Mr. Stupak.  Thank you, Mr. Chairman.  Before I start my 
	questions, I would like to thank Chairman Barton and 
	Chairman Upton for respecting the process and holding a 
	hearing on this proposed legislation.  Earlier this 
	month, I and other members of the subcommittee had urged 
	the committee to hold a hearing on the bill which if 
	enacted would fundamentally alter our cable laws.  I 
	would also like to commend the authors for including 
	sections on interconnection, municipal broadband, and 
	ensuring that VOIP customers have access to 911.  Earlier 
	this year the Congressional Rural Caucus Telecommunications 
	Task Force, which I co-chair, re-released our 
	telecommunications rewrite principles.  These principles 
	included USF reform, intercarrier compensation, 
	interconnection, and advanced access to broadband in rural 
	areas to preserve strong phone service and promote strong 
	broadband service.  Mr. McCormick, I am pleased that you 
	included USF and intercarrier compensation in your testimony.  
	How important is it that Congress act on these issues this 
	year?
	Mr. McCormick.  It is very important, Mr. Stupak, and we are 
	hopeful that the committee will turn to those issues once it 
	moves forward on the video choice legislation, as the 
	Chairman has assured us that the committee will
	Mr. Stupak.  Thanks.  On interconnection, it is crucial to 
	preserving both competition in the voice market and 
	affordable phone service in rural areas.  That is why the 
	rural caucus included in our principles for 
	telecommunications reform the requirement for strong 
	interconnection language.  I am pleased that the draft of 
	the legislation includes language.  However, I see some 
	room for ambiguity.  Mr. McSlarrow, if you will, do you 
	think the committee print should be clarified or do you 
	think this section will be subject to litigation for years 
	on what is or considered, quote, necessary, end quote and 
	effectuate interconnection?  Could you comment on that for 
	me?
	Mr. McSlarrow.  I think as currently drafted, it would risk 
	litigation.  I think we can clarify it by making clear that 
	just as the competitive local exchange carriers have access 
	under Sections 251 and 252 to all the necessary requirements 
	and rights for interconnection that regardless of the 
	technology, and if you are a VOIP provider that you can get 
	all the same rights under those same two sections.
	Mr. Stupak.  Does anyone else care to comment on that?
	Mr. McCormick.  Yes.  I think part of that you may want to 
	include, regardless of regulatory statutory classification, 
	since there is a definitional differential between certain 
	types of providers.
	Mr. Stupak.  Anyone else?  Okay.  Let me ask about national 
	franchise, and it is another issue that I have spoken about 
	often in this committee, about my concern that we close the 
	digital divide that the haves and the have-nots are not 
	determined by region or city.  I am concerned that this bill 
	will actually turn the digital divide into a micro problem, 
	as well where the haves and have-nots are determined by the 
	neighborhood.  While the bill does include an 
	anti-discrimination provision, there is no enforcement 
	language to enforce the provision and the bill includes no 
	build-out obligations.  The Telecommunications Act currently 
	says that cable providers must build-out to all households 
	in a franchise area, so Mr. Mayor, if I may ask Mayor Fellman 
	to speak to my concerns, what specific enforcement tools and 
	obligations do you need that are not in the bill right now, 
	and also can you address my concern that it is unclear on how 
	the rights-of-way disputes will be resolved?
	Mr. Fellman.  Thank you, Congressman Stupak.  I am glad you 
	raised that issue.  I was hoping that Chairman Barton would 
	also ask us for our definitions of competitive cable services 
	because I think you would get different definitions there, 
	and your point about build-out goes to that point.  Well, 
	under existing cable franchises today there is a variety of 
	mechanisms that local governments use to enforce build-out.  
	It is not uncommon to see build-out or upgrade requirements 
	phased in over a period of years with a provision that fines 
	or penalties are paid by the operator if they do not meet 
	those deadlines.  Another option would be a court order 
	mandating compliance within a certain period of time.  
	Companies are usually required to post security in the form 
	of bonds or letters of credit which have the potential to be 
	forfeited if those requirements are not met.  So having first 
	the requirements to allow a reasonable deployment over a 
	period of time to serve all citizens and the mechanism to 
	enforce that through these variety of financial means is 
	absolutely essential in our opinion going forward.
	To your question about rights-of-way, again, similarly, we 
	have bonds and letters of credit posted.  If rights-of-way 
	ordinances or regulations are violated, there is potential 
	for financial penalties.  Some of these violations could be 
	violations not of franchises but of local police power 
	ordinances where the remedy might be a citation to appear in 
	municipal court and pay the fine that the court would impose 
	for that.  Our biggest concern, as I mentioned earlier, is 
	that under the draft bill it appears that the only remedy for 
	someone--for a company challenging local enforcement of 
	rights-of-way provisions--is to take that to the FCC.  Number 
	one, we are not comfortable with the FCC being the national 
	right-of-way judge, but number two, I think it would be 
	cost-prohibitive for many communities to come to Washington 
	to defend their rights-of-way regulations.
	Mr. Stupak.  Does anyone else care to comment?  Mr. Keefe?
	Mr. Keefe.  I have two quick points.  Two quick points, and 
	it gets back to the issue of, you know, how effective the 
	telephone companies are being in the licensing process.  In 
	our experience at Atlantic, we haven't seen telephone 
	companies come in and say oh, we will take what the local 
	franchise--just, you know, take that license, cross out their 
	name, put in ours and we will move forward.  They are always 
	looking for a difference, and the two differences we have 
	seen are, there is no specific deployment of network so you 
	get a license and you turn it on whenever you want and not in 
	our areas but wherever you want in some areas, and they have 
	a right to withdraw without penalty, so if things don't go 
	well, presumably they close up shop and move away.  None of my 
	licenses have that right.
	Mr. Stupak.  Mr. McSlarrow?
	Mr. McSlarrow.  I think on the issue of non-discrimination, 
	the problem we have is that with self-selection and the ability 
	to cherry pick community by community and neighborhood by 
	neighborhood is, you can have the language and it sounds good, 
	but it is just an illusion.  The issues about build-out, I mean, 
	I represent the competitor.  It would be an odd thing for me to 
	urge you to tell the competitor to compete with us every place, 
	but as a public policy matter, currently under law, that 
	negotiation is placed with the localities to negotiate with 
	providers.  That makes sense to us.
	Mr. Stupak.  Mr. McCormick?
	Mr. McCormick.  Mr. Stupak, thank you.  The cable industry 
	deployed voice services over its network without any build-out 
	requirement.  They deployed Internet access services without 
	any build-out requirement.  There is a redlining prohibition 
	in the bill.  The redlining provision is enforceable in two 
	ways.  First, the FCC is given authority to require a 
	build-out to specific communities or parts of the communities 
	upon application.  Secondly, there is a death penalty 
	provision.  If you redline and you are found guilty of a 
	willful or repeated violation, the FCC can revoke your 
	franchise.  Those are pretty powerful enforcement provisions 
	for redlining and they are provisions that do not in any way 
	apply to the cable industry's entrance into the voice market or 
	any other competitor's entry into the voice market.
	Mr. Stupak.  Going back to what Mr. Keefe said that, you know, 
	there are two problems he has with it.  There is no specific 
	deployment requirement and there is a right to withdraw.  I 
	mean, by the time you get the FCC, you will never get there.  
	You withdraw, then you assess a penalty to something that 
	doesn't exist?
	Mr. McCormick.  Well, if you withdraw, you lose your 
	investment.  This is an area where this committee has had 
	wonderful success in bringing competition in telecommunications 
	and in every area, whether it was CLEC entry into voice, 
	whether it was the wireless industry, you have always allowed 
	companies to enter the market and begin to design and build-out 
	a business--
	Mr. Stupak.  Well, we have greater reporting requirements, and 
	this legislation for franchise, if you want to go for a 
	national franchise, all I see you have to put down there is 
	your name, who you are, your address.  There is nothing in 
	there who, when, or where are you going to deploy and what 
	timeframe or anything.  I think the reporting requirements 
	would certainly have to be increased in this legislation, a 
	national franchise at least.  I thank you, Mr. Chairman.  Thank 
	you, gentlemen.
	Mr. Upton.  Mr. Ferguson.
	Mr. Ferguson.  Thank you, Mr. Chairman.  I want to begin with a 
	question for Mr. Citron from New Jersey.  Welcome, glad to have 
	you here.  In your testimony you had emphasized how access to 
	E-911 infrastructure by VOIP providers is essential to provide 
	consumers with the protections of E-911.  You mentioned in your 
	testimony that in Verizon service areas, particularly in our 
	home state of New Jersey--it seems that Vonage is totally 
	compliant--it provides consumers with fully enhanced 911 service.  
	First, thanks for this cooperation.  Your work with Verizon is 
	really a model for how this sort of partnership can work and 
	should work nationwide.  In your opinion, why are other parts of 
	the country taking longer to roll out E-911 service by VOIP 
	providers?  Are there technological hurdles, and if so, whatever 
	the hurdles are, how have you and Verizon in working together, 
	how have you overcome some of those hurdles?
	Mr. Citron.  Thank you.  It is a great question.  Verizon has 
	been an excellent partner to voice over IP industry.  When we 
	got together with Verizon at the enactment of the FCC order, 
	Verizon came up with a plan with Vonage to create one set of 
	standards for interconnection to the entire Verizon E-911 
	network in every single local jurisdiction that they served.  
	That has allowed us to nearly complete our entire build-out in 
	this company with Verizon.  
By the same token, many of the other operators that are both RBOCs and 
more local exchange carriers do not have such capability or have not 
instituted one.  So in those cases, we actually have to negotiate 
interconnection capabilities and the technical standards in each and 
every local market.  As a matter of fact, in some markets like Illinois, 
the one where we are finally making good progress but have had a lot of 
frustration, the incumbent operators and even the State operators have 
had difficulty in deciding how it is we would actually transmit those 
calls and under which standards we would use even though a number of 
national standards have already been published.  By granting access 
rights to the underlying infrastructure, these operators will be forced
to come to the conclusion in a reasonable period of time and grant
access.
	Mr. Ferguson.  Thank you.  Again, it is an example of something 
	that had gone right and it is an example of a market and the 
	private sector working cooperatively in a way that is really 
	benefiting consumers and certainly from a public safety 
	standpoint.  Mr. Misener, I have a question.  Here are some 
	quotations I want to share.  Bill Gates in June of 2003:  "I am 
	really pleased with how the cable industry has been providing 
	openness on the cable model platform.  There is a lot of 
	openness being provided by that platform so I think the cable 
	industry is to be congratulated for that."  Chairman Powell 
	said in 2003 also:  "I don't know that I have yet seen sort of 
	a compelling record that we have a clear and demonstrable 
	problem on this issue," when he is talking about whether the 
	FCC should regulate broadband providers in terms of content.  
	Commissioner Adelstein said also in 2003 on this issue:  "We 
	don't have overwhelming evidence of a problem right now and 
	there would have to be substantial evidence that such mandates 
	are now a solution," she said a solution awaiting a problem.  
	We have a Republican, we have a Democrat, we have a billionaire 
	innovator.  All seem to be describing the same thing.  They are 
	saying that net neutrality regulation, it seems to be a solution 
	in search of a problem, and until we have evidence, suggesting 
	caution.  What evidence do we have, or what evidence are you 
	aware of that there is blocking or a problem in terms of 
	access?  What evidence do we have?
	Mr. Misener.  Thank you, Mr. Ferguson, very much.  Currently, 
	very little, but that doesn't mean it is not going to happen.  
	They have the power to do it.  They have announced their 
	intentions to do it and the regulations that prevented them from 
	doing it just were released last year.
	So they couldn't do it earlier.  They were waiting for both FCC 
	action and court decision.  They have been on their very best 
	behavior, and noticeably, some of the CEO statements coming out 
	of the telcos were issued after the FCC's final decisions.  So 
	they have announced their intentions to engage in this kind of 
	discrimination that I have described. 
	Moreover Microsoft is part of a coalition that I am involved 
	with, so they're very concerned about this as well as Amazon, 
	and other players here.  Just because it hasn't happened, it 
	doesn't mean that we have to turn a blind eye to the reality of 
	them planning to make it happen.  And they have, you know, been 
	refreshingly honest I have to say about their intentions.  And 
	so, it is nice to know that that is what they want to do, a nice 
	try.  But they ought not to be allowed as a matter of public 
	policy to take their market power over the network and extend 
	it to market power over content, in a way that has never been 
	allowed before.
	Mr. Ferguson.  I would just echo, and my time is about up, what 
	Chairman Barton was talking about before in terms of it is very 
	difficult to address a problem unless we can really get our 
	arms around it.  And unless we can turn to the experts to help 
	us get our arms around it, it doesn't seem like there is any 
	chance whatsoever, in the near future at least, that there will 
	be any kind of consensus in terms of the experts, you all who 
	we turn to get our arms around this problem.  And it seems to 
	me that the language that is included in this draft, in a very 
	reasonable way in the short-term addresses this problem in an 
	appropriate way.  It leaves open the possibility obviously, of 
	looking at this as we gather evidence.  But I would, I don't 
	have any time left, but I appreciate your comments.  I thank 
	all of you for being here today.
	Mr. Upton.  Mr. Pallone?
	Mr. Pallone.  Thank you, Mr. Chairman.  I wanted to ask about 
	the emergency services also.  And I know that Mr. Citron talked 
	about his success in basically rolling out E-911 to 70 percent 
	of the subscribers.  So maybe I will ask Mr. McSlarrow, what is 
	happening in terms of your voice over IP services in addressing 
	E-911 in that issue?
	Mr. McSlarrow.  We are a facilities-based provider industry.  
	And as such, we are fully compliant with E-911 today, and we 
	think that what is in the bill today is a great step forward.
	Mr. Pallone.  Okay.  And then in terms of--going back to 
	Mr. Citron again, you said that you are at 70 percent.  What 
	would it take to build up the other 30 percent?  I know you 
	addressed that a little bit to Mr. Ferguson's question.
	Mr. Citron.  Sure.  We have plans in place currently to 
	build-out to everyone of our customers E-911 capability.  I 
	think there are two points here that we should recognize.  
	First, today, the requirements for E-911 should be really 
	extended to all Americans, not just those who use voice over 
	IP.  Secondarily, in order to continue to build that we 
	absolutely need liability parity.  There are emergency 
	operation centers in this country who refuse to answer a 
	Vonage voice or IP 911 call, because they are afraid of 
	liability.  Nina has actually written on this topic to this 
	committee, and we would urge the committees to move forward 
	to ensure that liability parity is provided.  Then following 
	access to underlying elements, one of the differences between 
	us and the cable operators, we are not facilities based.  So 
	our consumers move around a lot.  And therefore we need to 
	build that now, not just where we physically have 
	infrastructure, but the places where we don't.  And therefore 
	we will need access to those underlying elements.
	Mr. Pallone.  I wasn't going to ask about the liability issue, 
	only because it is really not within this committee's 
	jurisdiction.  I guess it is more with Judiciary.  But I, you 
	know, I understand the concern over that regard, but we just 
	don't normally deal with it in this committee.  Let me ask the 
	Mayor, in terms of these E-911 issues, in terms of, you know, 
	local access or whatever.  Would you want to comment on any 
	of this in terms of, you know, the significance of it?
	Mr. Fellman.  Well thank you, Congressman.  I think anything 
	that improves public safety we support.  And we have in other 
	proceedings at the FCC, the national associations have been 
	pushing for, ever since VoIP was on the screen of requiring 
	911 services to be available on that kind of a service.  So 
	we appreciate the fact that it is in this bill.  Personally, 
	I am a little concerned that the FCC is going to have the 
	authority to determine or to require it unless it is not 
	technically or economically feasible.  And I think if we are 
	going to deploy this technology to all Americans, then all 
	Americans ought to have access and to be able to call 911 if 
	they have an emergency.  And in just the concept that the 
	Commission might say, well it might cost too much to do it 
	with the kind of technology you are doing, so we won't require 
	it in that circumstance, gives me cause for concern.
	Mr. Pallone.  Okay.  I have about a minute-and-a-half left, 
	so if you want to talk about the liability a little more.  I 
	mean I know again, it is not within this committee, but if 
	you want to talk about how that impacts you, you know, I 
	would appreciate your comments.
	Mr. Citron.  Well absolutely.  Well as recognized in my 
	testimony, we do agree and share and worked with mayors in 
	many towns about doing whatever is capable for making E-911 
	available to everyone.  And the biggest problem we have is we 
	have literally jurisdictions who will not take that call.  
	And if mayors are empowered or other legislators, or let us 
	say the bodies to afford the liability protection to mandate 
	the ability to take those calls, of course that would be very 
	helpful.  The thing, and another note that has been raised as 
	well and in reference to my testimony, is that we also do 
	collect 911 fees and remit it back to States.  And one of the 
	things that we would ask for as well, is to make sure that 
	these States use these fees to continue to upgrade the 
	build-out of the 911 centers.  So that they can have the most 
	advanced technology in order to rapidly respond to a 
	customer's call.
	Mr. Pallone.  Okay, thank you.  Thank you, Mr. Chairman.
	Mr. Upton.  Mr. Bass?
	Mr. Bass.  Thank you very much, Mr. Chairman.  I have to 
	preside in exactly seven minutes.  So I am only going to ask 
	one question.  I was wondering if those of you who have not 
	made any comment yet, could you comment on the issue of a 
	single Federal franchise, all local franchises, or the hybrid 
	idea that I am pushing for which is to have a Federal 
	franchise as a backstop, but enable the States to have a 
	franchising option which they could adopt and implement in 
	their own territories.  Anybody want to comment?  Yes, sir?
	Mr. Fellman.  Congressman, thank you.  I have listened with 
	interest in your opening comments about the need for, in your 
	opinion, States to have the flexibility to deal with their 
	localities because of the unique nature.  And I would just 
	take that one step further and say we currently have in 
	Title VI of the Communications Act a Federal franchise 
	framework that allows for a local role in that process.  So 
	I guess where I would disagree with you, sir, is to continue 
	to reform the Federal framework for franchising, but to allow 
	the local decisions to be made locally, and not at the 50 
	State capitals.
	Mr. McCormick.  Thank you, Congressman, for our national 
	scheme.  And just get onto it.  Allow consumers to have the 
	benefits of choice.
	Mr. McSlarrow.  And like Mayor Fellman, I think our preference 
	is to take the existent system and streamline it, and reform 
	that.  I think probably the least preferable would be one 
	where we remove the local accountability.  We don't have 
	national uniformity and we end up going to State PUCs.
	Mr. Bass.  Anybody else want to comment?  If you don't, I 
	will yield back, Mr. Chairman.
	Mr. Upton.  Mr. Inslee?
	Mr. Inslee.  Thank you.  Mr. Misener, you talked about taking 
	issue with the statement that we have had no protection or 
	regulation of the Internet before.  You asserted that we had 
	an environment in that regard, and that has been successful 
	until fairly recently in preventing discrimination and 
	preventing the violation, sort of a neutrality principle.  
	Could you elaborate on that and tell us from a historical 
	standpoint, what you mean has occurred in that regard?
	Mr. Misener.  Certainly, Mr. Inslee.  We had a circumstance 
	where over the past three or four years, the FCC aggressively 
	deregulated the broadband infrastructure, the broadband 
	networks.  In many of the rules that had heretofore applied 
	to broadband networks provided by the telecos, primarily the 
	wireline providers, truly were outdated and needed to be 
	dispensed with.  And it made a lot of sense to get rid of 
	them.  But unfortunately, we believe the Commission went too 
	far and got rid of all the rules.  And, in particular, it 
	would make sense to us to remove a non-discrimination 
	requirement only after it was shown that the market were 
	truly competitive.  That is to say that a consumer had access 
	to more than just true broadband service providers.  And that 
	simply isn't the case now, as much as we would like it to be, 
	and it won't be the case anytime soon.  And so we are asking 
	essentially for a reinstatement of just the non-discrimination 
	provisions.  Not all the other things, tariff for filing 
	requirements, entry/exit rules, those sorts of burdensome 
	rules.  And so it is just trying to preserve the longstanding 
	environment in which the Internet in this country grew up and 
	has been so successful.
	Mr. Inslee.  Now folk who have sort of suggested we don't need 
	a net neutrality provision have argued that they do not intend 
	on degrading transmissions, like putting those annoying bells 
	on your transmission.  But you have made the argument they are 
	essentially charging for additional services, that in a sense 
	is degradation or an equivalent of that.  Could you tell us 
	what you mean by that?
	Mr. Misener.  It is a great point.  And I think this is one 
	that is missed frequently.  That somehow you can prioritize 
	some content without degrading other content.  The way the 
	Internet works is there are lots of very high capacity 
	computers spread all around it, they are called routers.  And 
	these routers take information in, and they pump it out.  And 
	the way a router typically works, is the first bit of 
	information that comes in, is the first one that goes out.  
	But if you are in a circumstance where someone has been able 
	to pay to have priority, that means that their bits could 
	arrive later, at a later moment and actually is leapfrog over 
	the prior arrived bits and be sent out first.  Well that 
	means that the other guys bits are degraded.  It is not 
	possible to offer paid quality of service, or prioritization 
	in this way, without degrading other traffic.  What we said 
	is it is fine to prioritize some kinds of traffic, be it
	emergency services, be it live video over say data files 
	which can be delayed a couple of seconds, and no one will 
	care.  But when you start getting payment for it, that means 
	that some other people who can't or don't pay will 
	necessarily have their service degraded.
	Mr. Inslee.  Thanks.  Mr. McCormick, I wanted, one of the 
	things that is troublesome to me in this draft is that I 
	think for the first time that I am aware of would especially 
	prohibit this agency from moving forward in what I consider a 
	positive direction in net neutrality, and would sort of neuter 
	this agency to be able to deal with that issue.  And that 
	causes concern to me.  That in combination with this bill that 
	simply talks about principles, you know, the good book has the 
	Ten Commandments, it doesn't have the ten suggestions, or the 
	ten principles.  And even the Ten Commandments aren't always 
	honored I am told.  If we really want to have this principle 
	to be followed, to be respected, if you bought these concepts 
	that we would need to have a non-discrimination between bits 
	on the Internet, shouldn't we have a stronger regulation? 
	And shouldn't we stop removing the tools that are available 
	for the FCC and move forward?
	Mr. McCormick.  Congressman, let me see if I can respond to 
	that in a thoughtful word.  The principles say here that 
	consumers are entitled to competition among application 
	service providers and content providers.  And the bill says 
	you shall not do rulemaking on that.  So if the FCC were to 
	have rulemaking authority, and if the concern was not about 
	Amazon, but about the next Amazon.  And the issue is how does 
	the little garage store guy even get noticed on the search 
	engine that categorizes searches by the most frequent 
	searches?  So if Amazon is already number one, then Amazon is 
	always going to be number one on a Google search engine.  So 
	should the FCC prescribe that, because that is really not net 
	neutrality, but if the FCC were able to write rules under 
	these principles it could do so?  Or similarly, if somebody 
	were to say, we are really concerned that Google, what if 
	Google begins to sensor political speech as it has done in 
	China?  It has done that.  We are concerned it may do that 
	here.  So maybe we should apply to the FCC to write 
	regulations to make sure that content and service providers 
	don't do that.  
Congressman, this is a very dangerous thing.  We would be the first 
country in the world to be regulating the Internet.  And other 
countries may then say, well if the United States is going to regulate 
the Internet pursuant to its culture and its values, then we should be 
regulating the Internet pursuant to our culture and our values as 
well.  In the absence of a real problem, we should not give regulatory 
authorities this kind of jurisdiction.
	Mr. Inslee.  Just a quick follow-up.  Our time is concluded, 
	we have more to deal with tomorrow.  Thank you.
	Mr. Upton.  Let me just say that we have a series of votes on 
	the floor.  I want to go to Mr. Terry, and after Mr. Terry is 
	done, we will adjourn for about 20 minutes and come back.  We 
	are trying to get your hearing in the Senate delayed a little 
	bit as we talk.  So, Mr. Terry?
	Mr. Terry.  Thank you, Mr. Chairman.  And I do appreciate the 
	level of work that you and Chairman Barton and Jeff had put 
	into this bill.  And my focus is going to be on the franchise 
	aspect of this.  And Mayor Fellman, I am going to put this 
	question to you.  I spent eight years on the Omaha, Nebraska 
	City Council before I came here.  So when the issue of a 
	national franchising plan was brought to this committee and 
	myself, the first thing I thought of was the cities and their 
	roles in here, considering I was Chairman of our Cable 
	Subcommittee, and helped negotiate the city's latest agreement 
	with Cox Cable.  So to make a long story short, I went through 
	and I came up with a list of principles that I thought were 
	appropriate in the sense that competition with video is 
	appropriate.  It is good.  I have seen that in Omaha.  It 
	gives consumers or my constituents choices.  I also thought 
	that a streamlined approach would help the rule out of this 
	competition.  But I wanted to preserve some involvement by 
	the cities.  And so I developed a draft discussion that 
	preserved the city's role by what I call most favored 
	nation.  That a new entrant could automatically, it could do 
	one of two things.  If they wanted to streamline it and not 
	have to sit down and negotiate with Omaha or Denver, they 
	could just accept what the city had already adopted on the 
	major contract elements.  Or they can opt for negotiations.  
	That was, I thought, the best deal for the cities, but the 
	League of Cities disagreed with me and said, it didn't go far 
	enough for them.  And that left me with the impression that 
	they wanted an all or nothing approach, which really 
	frustrated me in this process, and left me without any, my 
	whole point was to protect the cities' roles in this.  I just 
	wanted to ask you in your discussions, you are the 
	representative from the League of Cities here today.  What 
	did they tell you has been their involvement and the League 
	of Cities true desire if they were to write this bill, just 
	status quo?
	Mr. Fellman.  Congressman, thank you for that question, 
	because I think there is a disconnect here.  I serve on the 
	National League of Cities Information Technology and 
	Communications Committee, I am the past chair of that 
	committee, and I have been one of the elected officials from 
	the League that has been involved in some of these discussions.  
	I don't recall ever being told about your proposal, so I 
	apologize if there has been a disconnect.  What you described 
	is actually very similar, not exactly the same but similar, to 
	the principles that Senator Burns and Senator Inoue have come 
	out on the Senate's part.
	Mr. Terry.  Yes, although I came out with it first.
	Mr. Fellman.  Well then I am here to give you credit for that. 
	We support the principles and while I would tweak, and of 
	course the devil's always in the details, I would love to work 
	with you and your staff on the framework that you just 
	described.  I am surprised to hear you say that the League 
	said it was a non-starter or something like that.  So I would--
	Mr. Terry.  I will verify who told us that, because when even 
	the League of Cities wouldn't support it, it went on a shelf.  
	And I told our Chairman that I had no amendment to that, even 
	though I had drafted one, because I wasn't going to introduce 
	something that wasn't going to be supported by you all.
	Mr. Fellman.  I will commit to you on behalf of the League 
	that we will sit down with you and your staff between now and 
	the time of markup.  And if what you are describing is 
	consistent with our position, and I think we can reach some 
	agreement to allow you to offer an amendment concerning your--
	Mr. Terry.  Well I appreciate that support, but I am not sure 
	it is going to be welcomed above, the--at this level in the 
	discussions.  But I wanted to get that out.  I appreciate that 
	that is something that you felt was important.  I am going to 
	go back and track down where the disconnect was from the people 
	we talked to and you.
	Mr. Fellman.  And I will do the same.
	Mr. Terry.  But then I also want to talk to Mr. McSlarrow from 
	NCTA.  I am sorry I missed your discussion.  It is one of those 
	days where you have a bazillion meetings, and you try and get 
	here for the important parts.  Now where do you stand on this 
	committee's draft, on the franchising language?
	Mr. McSlarrow.  Our preference is still along the lines, very 
	much of actually what you described, which is reform and 
	streamline the local franchising process.  But as I have told 
	the Chairman, I think this draft represents a significant 
	process.  If you are going to go down a national franchising 
	route, I think there are fixes that I would recommend to this 
	committee.  But fundamentally, we think that you don't have 
	to throw everything over board.  You can actually fix this 
	system and ensure a speedy entry by new competitors.
	Mr. Terry.  Very good.  That is all the questions.  I think 
	I will yield back.
	Mr. Upton.  Yeah, we have got four minutes to go.  So we 
	will come back in 25 minutes.
	[Recess.]
	Mr. Upton.  I know that the members of the first panel are 
	anxious to move along to various things, airplanes, and 
	Senator Stevens.  And we are going to continue--ou can shut 
	those doors--with Mr. Gonzalez.  Mr. Gonzalez?
	Mr. Gonzalez.  Thank you very much, Mr. Chairman.  And I 
	will try to hurry along.  Mr. McSlarrow, let me ask you.  The 
	cable industry as we know it today, historically speaking, 
	did it ever engage in any of the practices that you fear some 
	of the new entrants may be engaging in, such as cherry 
	picking, the selectivity that you were talking about?
	Mr. McSlarrow.  No, because in each case the rollout of the 
	network itself, which initially was essentially just to 
	deliver video service, was something that was negotiated with 
	the community.  And so there was recognition that you would 
	provide service as broadly as possible within the community, 
	there might be some places where that was uneconomic, but 
	that was subject to negotiation with the cities.  And then 
	later, when we rolled out voice services and high speed 
	data, we rolled those out to the entire network that was 
	already in place.
	Mr. Gonzalez.  But when you were a first entrant, because 
	you were the first of course in the video, the truth is you 
	were incredibly selective, at least if I remember the 
	experience in my city.  And the reason for that is because 
	economic models dictate that you have to basically survive 
	the rollout and the build-out in order to continue to 
	service all areas, as many areas as possible.  And I think
	the mayor was talking about how you can do that, phasing it 
	in and such.  And you don't think any of that is going to 
	be applicable to let us say the phone companies, or Verizon, 
	and Colorado, Texas or whatever, or in bigger areas?  That 
	there is not going to be any kind of negotiation at any 
	level if we had a Federal franchise that will obligate them 
	working within a reasonable economic model to provide their 
	service?
	Mr. McSlarrow.  I don't know is the short answer.  I think 
	you put your finger on it.  Economic actors are going to do 
	what is in their best interest.  I am not pretending to have 
	a white hat, no industry does.  They will pursue their 
	opportunities as they think makes sense economically.  What 
	is different historically in terms of how cable service has 
	been delivered is that it wasn't just up to us.  We had to 
	negotiate with someone.  And that someone, the city 
	municipality, whoever, may or may not have gotten it right.  
	But they were an objective third party that was part of that 
	equation.
	Mr. Gonzalez.  And you don't think any other type of formal 
	process, or economic factors, the realities of the 
	marketplace will be in play that will basically result in 
	these same companies, the new entrants taking into 
	consideration the same factors that the initial cable 
	providers did when they first rolled out and built out?
	Mr. McSlarrow.  It is quite possible.  The only point I 
	would make is that if you look at what SBC told Wall Street 
	just months ago, they basically said that is not our plan.  
	Our plan is we are going to go to particular neighborhoods, 
	so-called high value neighborhoods.  And we are not going to 
	go to low value neighborhoods.  So it may or may not turn 
	out to be the case, but that is the plan.
	Mr. Gonzalez.  I am not real sure if that is the statement 
	that was made in the complete form and such, because I don't 
	think that is what is going to happen.  Nevertheless, I 
	think we do have that responsibility, and that we are very 
	mindful of it.  But I think you ought to advance an argument, 
	and I know some of my colleagues are, and we need to be 
	careful about it, that the new entrant is going to come and 
	cherry pick.  And so if they are coming into Los Angeles, 
	they are only going to go ahead and go into Brentwood, or 
	whatever it is.  Do you truly believe that is going to be 
	the case?
	Mr. McSlarrow.  If you just look at it where they have 
	announced that they are going to serve, I think it is plainly 
	the case.  I mean you can--
	Mr. Gonzalez.  No, that is your honest opinion, that is fine.  
	I understand where you guys are already out there.  Your 
	build-out is built out.  Now let me ask you, some of the new 
	services that you have, a voice over Internet protocol, your 
	broadband, Roadrunner in San Antonio and such, do you 
	selectively, and do you pick and choose certain market 
	areas within your service area, to more aggressively promote 
	those particular services?
	Mr. McSlarrow.  I am sure we do and--
	Mr. Gonzalez.  Now why would you do that?
	Mr. McSlarrow.  In part, because it is subject to whatever 
	competitive pressures you are under.  I mean in other words, 
	what is happening right now is with two satellite providers, 
	you have got promotions and discounts happening all over the 
	place, you know.
	Mr. Gonzalez.  Well, but you are ruling out a new service, 
	this is new territory for you.  It makes sense that if you 
	want to be successful and be able to continue it, and to 
	expand your market share, is to promote it in those areas 
	where you probably have a more likely customer, doesn't it?
	Mr. McSlarrow.  It could.
	Mr. Gonzalez.  Well I, you know, I never had a small business.  
	I was a sole practitioner in law.  But it seems to me that a 
	lot of these things that you always talk about market forces, 
	you do have some objection to it, and you would like to see 
	the Government come in and maybe have a more direct approach 
	to things.  And we will explore all of that.  My time is up, 
	and I will submit some written questions to you and to other 
	members of the first panel.  Thank you very much for your time.
	Mr. Upton.  Mr. Pickering?
	Mr. Pickering.  Thank you, Mr. Chairman.  Mr. McCormick, how 
	are you today?
	Mr. McCormick.  I thank you, Congressman.
	Mr. Pickering.  Are you in support of a number portability 
	dialing parity for competitors?
	Mr. McCormick.  Pardon?
	Mr. Pickering.  Do you support number portability dialing 
	parity for competitors?
	Mr. McCormick.  Yes, we do.
	Mr. Pickering.  So you wouldn't have any problem if the 
	language is unclear on the interconnection, or the rights 
	and obligations for VOIP, making sure that as cable enters 
	that they would have the rights to numbers and dialing 
	parity?  So that wouldn't be a problem to just clarify, in 
	the underlying text?
	Mr. McCormick.  Well we think that if the VOIP providers 
	wanted to be treated as telecommunications carriers, they 
	should come in subject to the full societal responsibilities 
	that obtain, including universal service, access for people 
	with disabilities, and protections of customer privacy.
	Mr. Pickering.  So you would say, you know, CLECs today 
	have interconnection rights to numbers and portability, and 
	a limited access to network elements.  And that is the 
	current access and cable today goes through CLECs to get 
	access to provide VOIP services.  In the underlying bill we 
	want to give cable that direct, same rights and obligations.  
	You wouldn't have a problem with that would you?
	Mr. McCormick.  Well, I guess I am not completely following 
	your question, Congressman.  If what you are saying is that 
	IP voice providers want to be treated not as information 
	services, but instead as telecommunications services, and 
	you want to afford them the rights that are inherent with 
	being telecommunication service providers, we have no 
	objection to that, so long as they also undertake the 
	obligations that obtain to telecommunications service 
	providers.  And those obligations are sort of fundamental,
	the societal fabric of our Nation.  Access for persons with 
	disabilities, customer proprietary network information, 
	issues like those.  So I think we are quite open to the 
	competition in this area.
	Mr. Pickering.  So if we included those obligations, you 
	would have no trouble giving cable the same rights and 
	obligations as CLECs have?
	Mr. McCormick.  Well I think, yeah, I think the way the 
	language is that in effect says that the VOIP providers will 
	be considered, and elect to be considered providers of 
	telecommunication services when it comes to voice services.
	Mr. Pickering.  So you have no problem with that provision? 
	Mr. McCormick.  I already clarified that they have rights to 
	numbers--
	Mr. Pickering.  Obligations the same, right?
	Mr. McCormick.  Yeah, parity and obligations should go with 
	parity to rights.  So just to clarify, the intent of the 
	interconnection, or VOIP rights and obligations, is to have 
	competitive symmetry.  So that as cable enters into voice 
	services that they have the same rights, and importantly, the 
	same obligations as CLECs currently have.  And no more, no 
	less, so that there is regulatory and competitive parity as we 
	facilitate, just as we are removing barriers as you enter into 
	the video market.  There have been cases, for example, in 
	South Carolina, where CLECs who are VOIP providers have been 
	denied certificates as a telecommunications provider or 
	service provider.  
	Mr. Pickering.  And so we just want to remove any barrier on 
	both sides of the fence, and I think that we are in agreement, 
	is that correct?
	Mr. McCormick.  Well, I am aware of those cases, and what I am 
	suggesting to you is that language in this legislation goes 
	halfway.  It confers rights, without conferring the 
	corresponding obligations.  Those obligations--
	Mr. Pickering.  But at the same time you don't owe the same 
	obligations that--as you are a new entrant into video.  Should 
	you have the same obligations as cable companies have in 
	providing video service?
	Mr. McCormick.  We believe, I am saying that with regard to 
	VOIP operators, those telecommunications services with regard 
	to interconnections should be subject to the same societal 
	obligations with regard to any other services.
	Mr. Pickering.  I understand what you are saying as far as 
	their entry into your market.  If you entered into their 
	market--
	Mr. McCormick.  We have never suggested that CLECs or VOIP 
	providers be subject to the full panoply of common carrier 
	regulation that applies to voice.  So there are at least nine 
	specific requirements that apply to incumbent voice operators 
	that don't apply to either CLECs or to VOIP operators.  And 
	this committee has historically said that with regard to new 
	entrants, we shouldn't apply the legacy monopoly regulation.  
	So in connection with video entry, we are willing to undertake 
	those obligations of a competitive nature such as paying 
	franchise fees, and having PEG channels.  But with regard to 
	requirements to build-out to a footprint that doesn't match 
	our footprint, those requirements were imposed in an era 
	where there was in many cases a single provider who was 
	receiving the franchise.
	Mr. Pickering.  Mr. McCormick, I understand what you are 
	saying.
	Mr. McCormick.  Okay.
	Mr. Pickering.  But just again to clarify here.  
	Mr. McSlarrow, how important is this provision for you, just 
	as we want to accelerate video entry and maximize video 
	competition?  How important is this provision for cable and 
	VOIP providers to provide voice competition and bundle 
	services--voice, video, data and wireless--so that you can 
	compete?  And let me say this, for those who want build-out, 
	the best way to get built out is to make sure that both Bells 
	and cables completely compete in their full footprints.  
	Interconnection policy is critical to having full competition 
	in all services in both markets.  And if you want build-out, 
	getting this provision right is critical from a market 
	perspective and having capital incentives, so that you don't 
	lose market share, instead of some government mandate driving 
	market interaction and investment.  So Mr. McSlarrow, how 
	critical is that to cable that we get this right?  And do we 
	have it right in the current form?
	Mr. McSlarrow.  It is critical.  You said it better than I 
	could.  I mean the reality is that in the video marketplace, 
	we have satellite competition that already has 30 percent 
	market share and cable 65.  When you look at voice, ILECs 
	have 85 percent plus market share.  Fundamentally encouraging 
	voice competition is important.  With VOIP we have an 
	opportunity for the first time, both with facilities-based and 
	non-facilities based, to bring that kind of voice competition 
	to America.  Two things I would say--and you kind of hit on 
	one of them already, or both of them, probably--that I would 
	recommend we change is adding to the language on 
	interconnection that is in the draft today, to make clearer 
	that the other rights that CLECs have to number portability 
	and things like that are also being referenced.  And number 
	two, to make sure that a VOIP provider really has two paths.  
	They can either have direct interconnection rights, or they 
	can go through a CLEC if they choose.  And either way works.
	Mr. Pickering.  Thank you, Mr. Chairman.
	Mr. Upton.  Mr. Dingell?
	Mr. Dingell.  Thank you.  First question to Mr. McCormick and 
	to Mr. Fellman.  Gentlemen, yes or no, would you characterize 
	the wireless industry as competitive?  Mr. McCormick and 
	Mr. Fellman, what is your answer to that?
	Mr. McCormick.  Yes.
	Mr. Dingell.  Yes.  Mr. Fellman?
	Mr. Fellman.  Yes.
	Mr. Dingell.  Okay.  Now to you, Mr. Fellman, does existing 
	law allow localities to grant exclusive cable franchises?
	Mr. Fellman.  No.
	Mr. Dingell.  It does not.  Would you agree--oh, I am sorry.  
	So when the localities impose franchise requirements on cable 
	operators, the basis for doing so is not that the provider is 
	a monopoly provider, but rather the basis for the franchise 
	requirements is because the provider seeks to use public 
	rights-of-way to offer service for profit.  Is that right?
	Mr. Fellman.  Absolutely correct, Congressman.
	Mr. Dingell.  So then again, Mr. Fellman, so it is the use 
	of the public's property interest, not the monopoly or 
	exclusive rights that underlies the redlining provision in 
	existing laws, and the requirements to build-out service to 
	all residential households?  Is that right?
	Mr. Fellman.  That's right.
	Mr. Dingell.  And then when residents of the town through 
	their elected officials turn over valuable public property 
	rights for commercial use by the private company, it is 
	reasonable to ask in return that the public participate in 
	the benefits of that use, is it not?
	Mr. Fellman.  Yes.
	Mr. Dingell.  Do you differ with that, Mr. McCormick?
	Mr. McCormick.  No.
	Mr. Dingell.  And in fact that the Federal government when 
	it turns over its property rights, it imposes similar 
	requirements on private entities who they gave the right to 
	use such valuable public property for their own commercial 
	interest?  Is that right, Mr. Fellman?
	Mr. Fellman.  That is my understanding, yes.
	Mr. Dingell.  Now for example, the wireless industry, which 
	both you and Mr. McCormick agree is a competitive industry, 
	the Federal government imposes requirements on the use of 
	its public property interests, in this case the spectrum?  
	Is that correct?
	Mr. Fellman.  Yes.
	Mr. Dingell.  Now in granting spectrum rights, the Federal 
	government imposes construction and build-out requirements 
	to foster ambiguous deployment of service, particularly in 
	rural areas?  Is that correct?
	Mr. Fellman.  Yes, it is.
	Mr. Dingell.  Do you agree with that, Mr. McCormick?  Yes 
	or no?
	Mr. McCormick.  On a license basis, I do.
	Mr. Dingell.  I am sorry?
	Mr. McCormick.  Yes.
	Mr. Dingell.  Okay.  Now some other companies are required 
	to serve 75 percent of their marketer rights within 36 
	months.  And PCS licensees are subject to geographic and 
	population-based benchmarks, to ensure that licensees 
	build-out their systems, or face automatic forfeiture of 
	their license?  Is that right, Mr. Fellman?
	Mr. Fellman.  That is my understanding, yes.
	Mr. Dingell.  That meant that PCS licensees had to serve 
	one-third of their market's population within five years, 
	two-thirds within ten years.  Yet, nobody claimed then, or do 
	they claim now that these where less companies were monopolies, 
	is that correct?
	Mr. Fellman.  That is correct.
	Mr. Dingell.  So when we heard the arguments that 
	non-discrimination in build-out requirements, are mere vestiges 
	of the cable monopoly area era, that is not correct, is it?
	Mr. Fellman.  I would agree with you, that is not correct.
	Mr. Dingell.  All right.  And without a build-out requirement, 
	this bill then would confer on a private company the rights to 
	use the public's property for service, to only a select few 
	people?  Is that correct?
	Mr. Fellman.  Yes, it would.
	Mr. Dingell.  Now tell Mr. Fellman, as a custodian of the 
	people's property in your city, would this be considered by 
	your citizens to be a responsible use of public property?
	Mr. Fellman.  I don't believe that it would.
	Mr. Dingell.  Thank you.  Mr. Chairman, this is going to 
	surprise you greatly.  I yield back the balance of my time.
	Mr. Upton.  Thank you.  Mrs. Blackburn?
	Mrs. Blackburn.  Thank you, Mr. Chairman.  And thank you all 
	for your patience today, we appreciate it.  We are interested 
	in the issue and are anxious to hear your remarks.  
	Mr. McCormick, I was listening to Mr. Fellman's testimony and 
	I got the not so subtle impression that he likes the status 
	quo.  And so I was thinking about my good friend, Leroy 
	Knowles, over in McMinville and Shelbyville with Bendlum and 
	Telephone Company, and I just would like for you to very 
	briefly, 30 seconds, tell me what you think Leroy would have 
	thought of this testimony?
	Mr. McCormick.  Thank you Congressman.  Well as you know, 
	Leroy Knowles serves a little over 40,000 customers in middle 
	Tennessee and, you know, his telephone company is a co-op.  It 
	is owned by its customers, and they have invested to upgrade 
	their plant, so that it is capable of offering high-speed 
	Internet access and video.  But in order to offer video to the 
	customers that own the cooperative, Leroy Knowles has to get 
	25 separate franchises.  He's been at it for a year-and-a-half, 
	he doesn't have half of those 25 franchises yet.  And one of 
	the reasons he doesn't have the franchises is that every 
	franchise area he goes into, he's challenged by the incumbent 
	cable operator.  And some of those franchises he may only have 
	100 customers in that particular franchise area, because he 
	crosses three rural counties in Tennessee.  And the franchise 
	authorities want him to build-out to the rest of the franchise 
	area.  So he may touch the corner of a county with 100 homes, 
	and they say sorry, you can't have a franchise until you 
	build-out to the rest of the county.  So as a result, his 
	customers are being denied a choice, a choice that as owners 
	of the cooperative they've invested in, but they can't obtain.
	Mrs. Blackburn.  Thank you, I appreciate that.  Mr. Fellman, 
	thank you for being here today.  I need to ask you something.  
	Reading your testimony, I understood you were here as the 
	Mayor of Arvada, is that correct?
	Mr. Fellman.  That is correct.
	Mrs. Blackburn.  Arvada?
	Mr. Fellman.  Arvada, right.
	Mrs. Blackburn.  Well, I am southern girl.  Arvada works 
	real well with me.
	Mr. Fellman.  However, you would like--
	Mrs. Blackburn.  Okay, let me ask you this then.  You said 
	you have a legal practice, and you also represent cities and 
	counties, so are you imposing your position on representing 
	cities, municipalities, on these issues into your testimony?
	Mr. Fellman.  No.
	Mrs. Blackburn.  No.  So that doesn't color your opinion at 
	all?
	Mr. Fellman.  Not at all.
	Mrs. Blackburn.  Okay.  Now let me ask you this.  It is my 
	understanding that you have got two cable companies that 
	serve Arvada, correct?
	Mr. Fellman.  Two that serve today, actually three that have 
	franchises.  Two that--
	Mrs. Blackburn.  Okay, so two that are serving.  Do these 
	two compete head-to-head?
	Mr. Fellman.  They do not.
	Mrs. Blackburn.  They do not.  Now I had my staff call when 
	I found out--
	Mr. Fellman.  I am aware.
	Mrs. Blackburn.  You are?
	Mr. Fellman.  Yes.
	Mrs. Blackburn.  Okay.  And I asked them why they didn't 
	compete.  Do you know what their answer was to me?
	Mr. Fellman.  I know what my Assistant City Manager told me 
	his answer was.  I don't know how that was described to you 
	by your staff members.
	Mrs. Blackburn.  Their answer was because they don't want to.  
	That was the answer.  Is that they don't want to.  They serve 
	different areas.
	Mr. Fellman.  My Assistant City Manager advised me that he 
	began to describe the various legal threats and potential 
	litigation and regulatory hearings that began when the 
	council tried to bring this to a head.  And that the 
	conversation then took a different direction, so he didn't 
	complete his explanation.
	Mrs. Blackburn.  Okay.  All right, and the third franchise 
	that has been granted is to Champion Broadband?
	Mr. Fellman.  That is correct.
	Mrs. Blackburn.  Okay.  And how much of the city does 
	Champion Broadband serve?
	Mr. Fellman.  As I mentioned, they don't serve anyone.
	Mrs. Blackburn.  They don't serve anybody at all.  Okay.  
	And let me ask you this.  Looking at the situation that you 
	have there, where you have two franchise operators that do 
	not compete head-to-head, that are in separate areas, and 
	then you have a third one that hasn't been able to get off 
	the ground.  In your capacity representing the mayors in 
	the cities, and looking at your experience that you have 
	had, where build-out requirements promoted new entrants to 
	come in and compete with, where you had to have the build-
	out requirements.  In your situation where you have to have 
	build-out requirements, does this help or hinder your 
	customers?  Is it helping with competition in your city?  Is 
	it hindering competition?  Are your constituents better 
	served looking at it not as legal counsel, but looking at it 
	as the Mayor?
	Mr. Fellman.  With respect to Champion Broadband, I don't 
	believe that the build-out requirements had anything to do 
	with that company's decision not to serve.  They obtained 
	franchises in almost every city in the metro Denver area, 
	which is over 30 communities; they actually do serve in two 
	cities.  And when the market fell out on the industry in the 
	late ï¿½90s, around 2000, they ran out of money and they stopped 
	building their system.  So the build-out requirement did not 
	stop them, the market stopped them.  As far as how build-out 
	requirements help or hurt our customers and our citizens, I 
	don't believe that the build-out requirements are impacting 
	it.  When we had our legal battles with, I think it was AT&T 
	Broadband at the time and U.S. Cable, it was more--
	Mrs. Blackburn.  So let me interrupt you, just a little bit 
	there.  So you don't think build-out requirements have any 
	affect on this at all whatsoever?
	Mr. Fellman.  I think it has some affect on it, absolutely.
	Mrs. Blackburn.  Okay.
	Mr. Fellman.  But I don't think it hurts our subscribers.  
	I think the reason we don't require that competition is not 
	because of the build-out.
	Mrs. Blackburn.  Okay.  Do you represent any of these in the 
	greater Denver area, of those 30 communities, do you 
	represent as legal counsel any of those?
	Mr. Fellman.  On a periodic basis, yes, I do.
	Mrs. Blackburn.  Okay, all right.  Thank you, Mr. Chairman, 
	I yield back.
	Mr. Fellman.  Including if I might add, communities that do 
	have wire line competitors today.
	Mrs. Blackburn.  Okay.  Thank you.
	Mr. Upton.  Just trying to move along, because I know the 
	Senate Hearing is starting very soon.  Mr. Rush?
	Mr. Rush.  Thank you, Mr. Chairman.  Mr. McSlarrow, you have 
	indicated that cable always welcomes competition.  And 
	frankly, I want to say that you have been a passionate 
	champion for minority rights.  And as I said after this 
	hearing, I really want to talk to you more about the lack of 
	programming on cable networks.  But the question that I have 
	right now is what specific suggestions do you have that might 
	address the issue of adequate enforcement to ensure 
	non-discrimination that we might consider as a part of this 
	draft?
	Mr. McSlarrow.  I can think of two.
	Mr. Rush.  And whether or not you want to address the issue 
	before the sources are rolled out, or look back and make a 
	judgment after they have been rolled out?  If you want to do 
	it beforehand, I guess I would, even in a national 
	franchising framework, wonder why a local community, whatever 
	the jurisdiction is defined, couldn't participate in a 
	deployment schedule with whatever the provider is?  If you 
	want to do it after the fact, and just make it an enforcement 
	mechanism and make a judgment, then I would say you could do 
	two things.  One, how do you judge the selection process of 
	the communities that are being served?  And number two, I 
	would say that the enforcement mechanism should.  
	Mr. McCormick, do you have any response to that at all?
	Mr. McCormick.  Yes.  First Congressman, we really appreciate 
	your support for this legislation for video competition and 
	video choice.  We think that the legislation takes a very 
	appropriate approach to the issue of redlining, or where 
	there is any part of the community that is not being served 
	on the basis of economic value.  And that the penalty is 
	basically injunctive relief, or revocation of license.  So 
	the FCC that can direct upon application of a community that 
	there is an area not being served and it must be served.  
	In the case of a willful repeated violation, it is a death 
	penalty provision that says that the Commission can revoke 
	a license.  The cable industry 22 years ago came to this 
	committee and said that there needed to be a Federal scheme, 
	because of overreaching by cities.  And we are coming to 
	you today and saying with regard to introducing new 
	competition there has been overreaching, and it is time for 
	some more Federal schemes.  So that is our position.
	Mr. Rush.  All right.  Thank you, Mr. Chairman.  I yield 
	back.
	Mr. Upton.  Mr. Gillmor?
	Mr. Gillmor.  Thank you, Mr. Chairman, and a couple of 
	questions for Mr. McCormick.  I mentioned in my opening 
	statement I represent a rural district in Ohio, and unlike 
	many of the metropolitan areas, my constituents lack the 
	availability of a lot of advanced telecommunication services 
	that are generally commonplace and even expected in urban 
	areas.  Realistically, what are the prospects that this 
	legislation will enable rural telephone companies to go into 
	competition with local cable providers?
	Mr. McCormick.  Well realistically, a very high possibility.  
	There is no group, or disadvantage in small rural telephone 
	companies by the franchising process.  In Minnesota for 
	example, in Lakedale, Minnesota, it is a small community.  
	It has one traffic light, one gas station, one grocery 
	store.  But there are four wireless providers of voice.  
	There is a cable television operator who provides voice 
	service.  And there is a telephone company that provides 
	voice service.  So the telephone company upgraded its plant 
	to deploy video, but the local franchising authority won't 
	let them offer it.  They have for over two years taken this 
	all the way to the Minnesota Supreme Court.  And build-out 
	requirements that go beyond the footprint of the telephone 
	company have precluded that telephone company from being 
	able to offer video service.  So for small telephone 
	companies to be able to compete head-to-head, they have to 
	be able to offer the bundle of voice, video, and Internet 
	access.  So this is very important to rural companies. 
	Mr. Gillmor.  Okay, thank you.  Let me bring up something 
	else, that is Ohio specific.  The Cleveland Indians are 
	partnering with local cable systems on a new channel that 
	published reports have stated is going to be priced at 
	nearly double the rate that the Indians games cost consumers 
	last year.  And I have been an Indians fan for a long time 
	and I know what their record is.  I am not sure why anybody 
	would pay double of what they did last year, but some people 
	apparently are willing to do that.  In your opinion, is this 
	increase in price going to hinder your member company's 
	ability to compete with the incumbent video provider?
	Mr. McCormick.  Congressman, we think it is very important 
	that there be access to programming.  Particularly that 
	programming that is integrated with a multi-channel video 
	provider.  This committee has previously passed legislation 
	to deal with that in the nature of satellite delivered 
	programming.  We think that when it comes to regional 
	sports networks and others, that that is an appropriate 
	area for action by this committee.
	Mr. Gillmor.  Thank you very much.  I yield back.
	Mr. Upton.  Thank you.  Mr. Buyer I know is going to ask 
	questions, and as I understand it, he does not have questions 
	for Mr. McCormick, or Mr. McSlarrow.  So you two are excused.  
	We will send you a note.  Give Senator Stevens our best.  And 
	thank him for allowing us to keep you a little bit long.  And 
	I yield to Mr. Buyer.
	Mr. Buyer.  Thank you, Mr. Chairman.  You are very kind to let 
	me sit in, as I am not a member of the committee.  And this 
	legislation is going to continue in the process, I would love 
	to talk to the two gentlemen, but I am not going to hold them 
	up.  I am a little concerned when I was listening to the 
	questioning by Mrs. Blackburn, and the mayor, because mayor, 
	you are in a tough position.  I don't know who invited you to 
	come here to testify, but I probably would have declined had I 
	been you.  Because you are a Mayor, you are also an attorney, 
	you also represent individuals out there, you negotiate these 
	deals.  And how you can separate your views and opinions 
	without having a conflict, you are a better man than I am, 
	because I was just listening to the exchange, and it makes it 
	pretty tough because you are making money out there, and 
	supporting a family.  And based upon contracts that you have, 
	and that has to influence your judgments and your testimony.  
	So there is a reason that we ask all of our witnesses what are 
	your contacts, what are your communications, what are your 
	consulting fees.  So that the counsel that individuals give 
	to us, that we can have our best judgments.  You must be a 
	lot better than I am.  But I know that somebody has put you 
	in a very tough position.
	Mr. Fellman.  Well Congressman, I put myself in that position, 
	but it is no different than the position of my local elected 
	official colleagues, who work for the telephone companies and 
	the cable companies.  And there are many, and we have very 
	heated and passionate discussions over these public policy 
	issues.
	Mr. Buyer.  Yeah, I am quite certain.  I was intrigued by the 
	first question from the Ranking Member, Mr. Dingell when he 
	was really kind of excited about the competition, really that 
	there is in wireless.  Well yeah, it is thriving and it does 
	really well because it is not regulated.  Right?  I mean so 
	what do we want to do?  We want to get in there and let 
	everybody sort of have at it, push the bounds of technology, 
	we all get the benefit.  So whether it is the telephony 
	versus others in voice, or in broadband.  Let me ask this, is 
	it an open question.  I haven't a clue how all of you would 
	answer.  Do any of you share my concerns beyond the semantics, 
	about us, the difference between calling these things cable 
	service versus a video service?  Should we actually use the 
	word cable?  Is it better for us just to call it video 
	services, since the beyond is undefined, or are you saying 
	Steve, it is just semantics, don't worry about it?  Are there 
	any thoughts, nobody?  Great, I am the only one that gives a 
	damn about it, huh?  I think that is pretty sad ,guys, because 
	none of you want to, you don't care, or you don't tackle, or 
	don't worry about it?
	Mr. Fellman.  Congressman, I will jump in.  You know, I 
	think the real issue is how we treat the services.  And if 
	we end up with legislation that treats like services alike, 
	then we will be doing the right thing.  And whether we call 
	it cable, and we define it to include IP television services, 
	or whether we call it video programming services, I am not 
	sure that matters.
	Mr. Buyer.  Right, if we are going to treat all services 
	alike, rather than get into this whole issue about 
	reimbursement for what we do in the rights-of-way.  You know, 
	what they do in Florida, maybe is the smart way to do this.  
	They do it as an entertainment tax and everybody is included, 
	and everybody is treated the same.  That is why it is pretty 
	much preferable to call this a video service, and you include 
	satellite in this.  Does anybody have any thoughts on that?
	Mr. Fellman.  I would love to see it--
	Mr. Buyer.  No, I don't want to hear anymore.  These guys are 
	being too quiet.  Does anybody have any thoughts about 
	including satellite?  Thank you, Mayor.
	Mr. Misener.  Mr. Buyer, not specifically on that, but to 
	your broader point of looking at this holistically, I 
	completely agree with you.  That is why we think it is right 
	to be talking about that with neutrality, or the ability of 
	consumers to get their video services from Internet based 
	sources in the context of national video franchising, because 
	the ultimate goal of all policymakers here is to give consumers 
	more choice.  And we see the overwhelming choice picture, the 
	more competition coming in the future from the Internet, rather 
	than from just one more content provider.  So rather than 
	looking at this, as sort of doubling the number of providers 
	that are available, we ought to be looking at it as hundred 
	fold, thousand fold increase of possible video providers in 
	the coming years.  And so, I agree with you, we ought to look 
	at video holistically, and also consider how regulatory 
	changes recently could actually serve to constrict the amount 
	of video competition, rather than enhance it.
	Mr. Buyer.  Should we have any concerns out there with regard 
	to these municipalities that want to get into the business 
	where they can provide a service, and then find themselves in 
	competition?  And then find themselves in dire straits?  Is 
	this something that we should say, yes, municipalities you 
	want to get into this business, it is okay?  Does anybody 
	have an opinion on this?
	Mr. Keefe.  I would say a couple of things about that.  First
	of all, the question was municipalities getting into video or 
	Internet, or even the telephone business.  I think that the 
	programs that we have seen from some municipalities don't 
	really take into consideration the financial risks that they 
	are putting their cities in front of.  And the programs that 
	we have seen in places like Miami Beach, in our opinion are 
	tremendously under the gun given the competition that is in 
	the marketplace.  They want to get into the business because 
	they want free Internet for tourists.  And it seems like a 
	cool thing to do, and it has been done in other cities.  But 
	you know, the issue of network security, who has access to 
	that network, what it is used for, whether or not it is 
	available to fire and police, and the security that comes 
	around that, are all issues that haven't been answered.  So I 
	think the financial risk reward is some thing that hasn't been 
	investigated, and I think taxpayer dollars are not well served, 
	getting into this business.  And, you know, in my view there 
	is a bit of today, of talking about competition like the 
	telephone companies are going to bring competition to the 
	video business.  I got news for you; there are a lot of the 
	satellite guys today that are out there competing very strongly 
	in the marketplace.  In some of our markets like Miami Beach, 
	where we can't buy media effectively because we are a small 
	player in that marketplace, Echostar and DirectTV are pounding 
	that market as well as BellSouth with their products, every 
	second of every day.  We don't have that same capability, so we 
	have to compete in other ways.  So this isn't bringing more 
	competition to the marketplace, it is already there.  If it is 
	a new entrant, that is fine.
	Mr. Buyer.  All right.  Thank you, Mr. Chairman.
	Mr. Upton.  Ms. Cubin?
	Ms. Cubin.  Thank you, Mr. Chairman.  I have only two 
	questions because I know that the hour is getting late.  But 
	I would like to ask Mr. Misener, you were discussing premium 
	charges for higher speed and the actions on the Internet.  
	And, you know, talking about why you didn't think that that 
	was right.  I agree with the four Internet freedoms that 
	Chairman Powell brought forward and that I know you are 
	familiar with, and he didn't mention anything against 
	premium charges.  And if premium charges are so 
	objectionable, why do you suppose he didn't mention that?  
	And then, you know, I make the analogy to a postage stamp.  
	I can pay 39 cents for first class mail, or I can have bulk 
	mail, or I can pay for three-day priority or whatever and, 
	you know, I get different speed, but I have the choice on 
	that.  So go into the objection a little better if you will 
	for me?
	Mr. Misener.  Yes, certainly.  Thank you, Ms. Cubin.  I have 
	heard this mail analogy before, and there is a shipping 
	analogy, and obviously Amazon does a lot of shipping itself, 
	and so we are sort of familiar with that business.  I will 
	try to give you three different perspectives.  From the 
	consumer perspective, sitting in her home she has the choice 
	of shipping companies coming to her.  She has the choice of 
	at least four, USPS, UPS, DHL and FedEx, probably more.  And 
	she can choose among them freely.  In fact she can have 
	things delivered to her from two different shippers in the 
	same day at the same moment.  Contrast that with delivery 
	over the network, she has the choice of two, either the cable 
	company or the phone company, if she is lucky for broadband 
	content.  And the switching costs among them are astronomical.  
	They are very hard.  There are long-term contracts, there are 
	equipment rolls, and there are truck rolls, equipment changes; 
	that sort of thing.  
From the perspective of the shipper or the content sender, like in 
Amazon who does both, we send out content on the Internet, and we 
also ship.  We also have four choices of shippers that we can use 
freely.  It is a competitive market.  When it comes down to sending 
content to that one consumer in her home, we face an absolute 
monopoly.  There is nobody else.  No consumer takes two broadband 
Internet connections simultaneously, so it is a monopoly to get 
through there.  And lastly from the perspective, and this may be the 
most important point of all, the perspective of the other shipper.  
The LL Beans of the world, LL Bean and Amazon could both give 
competing free shipping, great priority service deals to the same 
customer simultaneously.  There is not, there is no capacity 
constraint that will prevent LL Bean or Amazon from doing a deal 
with FedEx and UPS, or both simultaneously.  That is not the case 
on the network.  If the network operator prioritizes some content 
over others, by definition, the others get degraded.  And so if LL 
Bean does a great deal with the network operator, Amazon is 
actually physically precluded from doing the same deal.
	Ms. Cubin.  And the consumer, how much responsibility does 
	the consumer have to find out those things, before they 
	subscribe to one or another.
	Mr. Misener.  Well assuming they have a real choice among 
	them.  And assuming if there were a competitive--
	Ms. Cubin.  Or if there are two, you know, then they have a 
	choice?
	Mr. Misener.  Not as a matter of either practice or sort of 
	theory, I mean the dualopolies do not behave like competitive 
	markets.  That has certainly been the experience, and 
	especially when there was such high switching costs.  A 
	consumer sitting in her home, faced with this sort of a 
	circumstance, is not going to want to call the truck to come 
	out and switch out the boxes, and give up her year long 
	contract, just--
	Ms. Cubin.  Why do you suppose Chairman Powell didn't 
	mention anything about the premium charges?
	Mr. Misener.  Well, he didn't get very specific.  These are 
	extremely high level principles that we are adopting.  In 
	fact, one of the principles that we are talking about 
	adopting today is one that entitles consumers to competition 
	among network operators.  I mean, who is going to be the 
	first person who files that complaint, based on this law, 
	that entitles consumers to network competition, and I don't 
	know how that happens.
	Ms. Cubin.  Okay.  I would like to ask this very quickly of 
	anyone.  I wanted to ask Mr. McCormick, but what do you think 
	the scope of Section 717, and this is where VOIP service 
	provider shall have the same rights, duties, and obligations 
	as a requesting telecommunications carrier under Section so 
	on and so on.  Where do you think those rights, duties, and 
	obligations are?  Does it go so far as to include that cable 
	companies should be able to access the Universal Service Fund?  
	Do you know the section I am talking about in the bill?  None 
	of you know?  Do you know?  We know and you don't know?  I 
	think this is an important question, because I am just going 
	to take the time to just read the section, so that you 
	understand.  Let me put the glasses on.  A VOIP service 
	provider shall have the same rights, duties, and obligations 
	as a requesting telecommunications carrier under Section 251 
	and 252 of such Telecommunications Act, with respect to 
	interconnection, including associated rights, duties, and 
	obligations necessary to effectuate such interconnection if 
	the provider elects to assert such rights.  So you don't 
	have any idea what those rights, duties, and obligations 
	are?
	Mr. Citron.  Sure, maybe I will take a stab at this one for 
	a second.  So as a leading voice of every VOIP provider in 
	this country, we would like to have the opportunity to 
	purchase services directly from network owners and operators. 
	Today statutorily we are prevented from getting access to 
	underlying elements inside the network.  We are statutorily 
	barred from having direct inner connect from getting phone 
	members, from number portability.  And so today, in order to 
	get those services, we actually have to go through a third 
	party, a competitive local exchange carrier.  There aren't 
	C-locks everywhere in this country, we will have to go and 
	negotiate such deals.  So part of the rights that this bill 
	might afford us would be the choice, the choice to go ahead 
	and get access to those elements as specified under Sections 
	251 and 252.  Now those are telecommunication provisions.
	Ms. Cubin.  Right.
	Mr. Citron.  I think that the bill itself has made a remarkable 
	step forward in this area.  I think that it is has been offered 
	some proffers, that a little extra clarity on what some of those
	rights are, should be included inside the bill.  Also one of the 
	other things I testified to earlier is that when doing so, I want 
	you to also make sure not to lump us in as a non-facilities based 
	voice IP provider, job obligations that don't make sense to us.  
	Obviously obligations to put wires in the ground would not be 
	something that may be appropriate.  So we have to figure out a 
	way of having those rights and obligations without actually 
	worrying about the statutory classification that would exist 
	for our provider.
	Ms. Cubin.  But does everybody agree, that the Universal 
	Service Fund would not be accessed by cable companies?
	Mr. Citron.  I think the question of Universal Service is 
	actually being raised in a number of different proceedings right 
	now, because there is a question about how this function moved 
	forward.  There are questions about who should be able to put 
	in, or be obligated to put in, under what mechanism they should 
	put in, and who would have the rights to go ahead and draw out 
	funding.  That is something that needs to be resolved by the 
	Congress.
	Ms. Cubin.  Thank you.
	Mr. Upton.  Mr. Markey assures me he has one question, a yes 
	or no question, and a unanimous consent to request?
	Mr. Markey.  Yes.  I ask unanimous consent to add into the 
	record letters from the AARP, the Association of Public Safety 
	Communications Officials, and a letter signed by over 100 mayors, 
	including mayors from some of the largest cities in the United 
	States, in opposition to the bill.  And I make that unanimous 
	request?
	Mr. Upton.  Without objection.
	[The information follows:]



	Mr. Markey.  Mr. Citron, just one quick question so we can get 
	it on the record.  Is it technically and operationally feasible 
	for Vonage to provide enhanced 911 service today?
	Mr. Citron.  Yes, when the underlying PSAP allows us to test 
	at inner camp.  As I testified earlier to, PSAP where the 
	clause would actually be entered by, have said we will not 
	take your call unless you have liability parity.  And without 
	that, it is absolutely completely impossible.  I would call 
	that operationally impossible, although I admit, it is not 
	all operational difficulty, it is the operation difficulty of 
	the PSAP.
	Mr. Markey.  Is it technically and operationally feasible for 
	Vonage to offer just 911 service today?
	Mr. Citron.  It would be the same problem with the PSAP.  The 
	PSAP will not take a phone call from Vonage, as specified in a 
	letter to this committee by NENA, the National Emergency 
	Numbering Association, which specifies that their members will 
	not take our calls without liability parity.
	Mr. Markey.  Okay, thank you.
	Mr. Citron.  You are welcome.
	Mr. Upton.  Five hours and 25 minutes, you are now excused.  
	Thank you, and I hope you make your flights.  I appreciate 
	your testimony today.  We are going to take a four- or 
	five-minute break, to get prepared for the second panel to 
	step up.
	[Break.]
	Mr. Upton.  We are ready to start the second panel.  We thank 
	you for your indulgence.  We sort of knew that it was going to 
	go long, the first panel.  And I understand that Ms. Rodriguez-
	Lopez has an important phone call to make at 4:15.  So we will 
	let you, at the proper time slip away, as long as you promise 
	to return, which I know you will.  We are joined by Ms Lillian 
	Rodriguez-Lopez, President of the Hispanic Federation; 
	Ms. Julia Johnson, Chairwoman of the Video Access Alliance; 
	Mr. Anthony Thomas Riddle, Executive Director of Alliance for 
	Community Media; Ms. Jeannine Kenney, Senior Policy Analyst for 
	the Consumers Union; Mr. Randolph May, Senior Fellow and 
	Director of Communications Policy Studies for The Progress and 
	Freedom Foundation; and Mr. James Makawa--
	Mr. Makawa.  Makawa.
	Mr. Upton.  Makawa, I am sorry.  Co-Founder and CEO of The 
	Africa Channel.  Welcome all of you.  And we will try to limit 
	your presentation to no more than five minutes.  Your testimony 
	is part of the record in its entirety.  Ms. Rodriguez-Lopez, 
	welcome, we will start with you.  You just need to press the 
	button.

STATEMENTS OF LILLIAN RODRIQUEZ-LOPEZ, PRESIDENT, HISPANIC FEDERATION; 
JULIA JOHNSON, CHAIRMAN, VIDEO ACCESS ALLIANCE; ANTHONY THOMAS RIDDLE, 
EXECUTIVE DIRECTOR, ALLIANCE FOR COMMUNITY MEDIA; JEANNINE KENNEY, 
SENIOR POLICY ANALYST, CONSUMERS UNION; RANDOLPH J. MAY, SENIOR FELLOW
AND DIRECTOR, COMMUNICATIONS POLICY STUDIES, THE PROGRESS & FREEDOM 
FOUNDATION; AND JAMES MAKAWA, CO-FOUNDER AND CHIEF EXECUTIVE OFFICER, 
THE AFRICA CHANNEL

Ms. Rodriguez-Lopez.  Thank you, I pressed the button.  Thank you, 
Mr. Chairman and members of the committee.  I want to really tell you 
how appreciative I am and thankful for you inviting me to testify here 
today on behalf of the Hispanic Federation, a human service 
organization serving over one million Hispanic Americans.  I am also 
a co-chair of Broadband Everywhere, a coalition of voices, supported 
by the American Cable Association and NCTA, that is focused on public 
polices that promote broadband deployment to every neighborhood in 
America.
	I have met and discussed this issue with intelligent people 
	representing both industries in an effort to better understand 
	the implications of a Federal broadband bill.  I feel it is 
	important, very important to make clear from the outset that 
	I am not anti-Bell.  I clearly support their entry into the 
	market given the possibility of additional competition and 
	programming in the video marketplace.  I think all the 
	industries--cable, telephone and other technology industries--
	have offered a lot to this country, and at the end of the day,
	must all work together.
	But I am here today to echo the position of many leading 
	Hispanic civic organizations across the country--the position 
	that any franchising reform legislation must contain provision 
	that guarantee us a reasonable and equitable deployment in 
	Hispanic communities.  And the question is, will the current 
	legislation bring broadband competition to our neighborhoods 
	in this equitable and reasonable way?  That is the central 
	question for me, and the focus of my work in this area.
	And I would pose a central question for this body.  Today, 
	only one in eight Latino households has broadband services.  
	So the stakes are high.  Thus, any video franchising reform 
	legislation must ensure that Hispanic communities get access 
	to the latest technologies as fast as other communities.  
	Nothing more, and nothing less.
	I want to state that for starters, the rationale for sweeping 
	Federal legislative reform has yet to be proven.  I believe 
	that through the involvement of municipal and State 
	governments, we can arrive at solutions that speed entry into 
	the market while ensuring that every neighborhood sees the 
	benefits of broadband and video competition.  On average, 
	there are three to four cable and satellite competitors in 
	most markets today.  And as I have learned by receiving 
	information from the telecom companies, it seems that most 
	new entrants get franchises relatively quickly.  We can make 
	a judgment as to whether 30, 60, 90, or 120 days is quick.  
	But given other things that happen in this country and how 
	we have to wait for processes to kind of unravel, it seems 
	reasonable.
	But if we are going to deregulate new entrants into the video 
	services industry, we must have meaningful non-discrimination 
	provisions.  Therefore, I urge the committee to include 
	provisions that require all providers, new and existing, to 
	make available their latest broadband and digital services 
	to all communities within a particular service footprint, 
	regardless of an area's income, within a reasonable time 
	period.
	Just one example, in Dallas, Texas a limited 
	non-discrimination provision as some have proposed, that 
	allows a provider to limit deployment only to areas self-
	selected by new providers, would mean that a new provider 
	could provide these services only to Park Cities, while 
	potentially writing off, or delaying for a significant 
	number of years service to the largely Hispanic Arcadia Park, 
	so long as it didn't discriminate within Park Cities. 
	In my home state of New Jersey, I and other Hispanic leaders 
	insist that we--I apologize, I am slightly nervous.  I and 
	other Hispanic leaders want to see a deployment that includes 
	a significant number of low-income, urban, rural, and minority 
	communities in a reasonable timeframe.  I am not naï¿½ve.  I do 
	understand that deployment must occur in stages, and that 
	certain priorities will be established.  But at the same time, 
	we need to maintain a legal system that protects the critical 
	role of local governments in ensuring that historically under-
	served communities are guaranteed access to the latest 
	broadband video services within a reasonable and enforceable 
	time period.  Both the telecom and cable industries must 
	continuously work to erase the digital divide that afflicts 
	both under-served and middle class communities.
	And Congress must support policies and laws that serve to 
	close the digital divide and promote American competitiveness 
	and productivity.  Only with policies that address those two 
	priorities can the Hispanic community truly benefit.  So 
	the access test of any meaningful reform legislation is that 
	it protects the access to the latest broadband technologies 
	for the greatest number of Americans, including our poor, 
	urban, and minority communities, within a provider's entire 
	service footprint.
	And finally, non-discrimination provisions must have teeth.  
	Indeed, the old saying that a right without a remedy is no 
	right at all, is clearly applicable here.  Federal and State 
	enforcement authorities must therefore have the explicit 
	authority to revoke licenses of any telecom or cable provider 
	that discriminates in the provision of new advanced broadband 
	and video services.  I believe that Congress can pass 
	legislation that will reform the process without doing damage 
	to protections that have been in place for nearly 20 years, 
	and would serve as the only meaningful national broadband 
	policy in place today.  But video franchising legislation 
	without these protections and oversight will set our 
	communities back decades in an age of information technology, 
	and global competition where none of us, least of all 
	Hispanic Americans, has a moment to lose.
	Thank you so much, Mr. Chairman.
	[The prepared statement of Lillian Rodriguez-Lopez follows:]

Prepared Statement of Lillian Rodriguez-Lopez, President, Hispanic 
Federation

Mr. Chairman, members of the Committee, I want to thank you for 
inviting me to testify here today on behalf of the Hispanic 
Federation, a human service organization serving over 1 million 
Hispanic Americans.  I am also a co-chair of Broadband Everywhere, a 
coalition of voices, supported by the American Cable Association and 
NCTA, that is focused on public policies that promote broadband 
deployment to every neighborhood in America. 
I have met and discussed this issue with intelligent people 
representing both industries in an effort to better understand the 
implications of a federal broadband bill.  I feel it's important to 
make clear from the outset that I am not anti-Bell.  I clearly support 
their entry into the market given the possibility of additional 
competition and programming in the video marketplace.   I think the 
cable, telephone and other technology industries have offered a lot 
to this country and, at the end of the day, must all work together.  
But I am here today to echo the position of many leading Hispanic 
civic organizations across the country - the position that any 
franchising reform legislation must contain provisions that guarantee 
us a reasonable and equitable deployment in Hispanic communities.  
Will the current legislation bring broadband competition to our 
neighborhoods in an equitable and reasonable deployment?  That is the 
central question for me, and the focus of my work in this area.
Today, only one in eight Latino households has broadband services, 
so the stakes are high.   Thus any video franchising reform 
legislation must ensure that Hispanic communities get access to the 
latest broadband technologies as fast as other communities.  Nothing 
more, and nothing less.  
For starters, the rationale for sweeping federal legislative reform 
has yet to be proven.  I believe that, through the involvement of 
municipal and state governments, we can arrive at solutions that 
speed entry into the video market while ensuring that every 
neighborhood sees the benefits of broadband and video competition.  
On average, there are three to four cable and satellite competitors 
in most markets today.  As I have learned, new entrants seem to get 
franchises relatively quickly.  
But if we are going to deregulate new entrants into the video 
services industry, we must have meaningful non-discrimination 
provisions.  Therefore, I urge that the Committee include provisions 
that require all providers - new and existing - to make available 
their latest broadband and digital services to all communities within 
their service footprint, regardless of an area's income, within a 
reasonable time period.   
	For example, in Dallas Texas, a limited non-discrimination 
	provision, as some have proposed, that allows a provider to 
	limit deployment only to areas self-selected by new providers 
	would mean that a new provider could provide new video 
	services only to Park Cities while potentially writing off, or 
	delaying for many, many years, service to the largely- Hispanic 
	Arcadia Park, so long as it didn't discriminate within Park 
	Cities!  In Detroit, this kind of limited non-discrimination 
	provision would mean that a service provider would first bring 
	service to wealthier communities such as Bloomfield Hills 
	while totally ignoring or intolerably delaying deployment to 
	Dearborn Heights and Detroit, so long as the provider did not 
	discriminate within Bloomfield Hills!      
In my home state of New Jersey, I and other Hispanic leaders insist 
that we see deployment that includes a significant number of low-
income, urban, and minority communities in a reasonable timeframe.  
I am not naï¿½ve.  I do understand that deployment must occur in stages 
and that certain priorities will be established.  But, at the same 
time, we need to maintain a legal system that protects the critical 
role of local governments in ensuring that historically underserved 
communities are guaranteed access to the latest broadband and video 
services within a reasonable and enforceable time period.   Both the 
telecom and cable industries must continuously work to erase the 
digital divide that afflicts both underserved and middle class 
communities.   And Congress must support policies and laws that 
serve to close the digital divide and promote American 
competitiveness and productivity.  Only with policies that address 
those two priorities can the Hispanic community truly benefit.  
Thus, the acid test of any meaningful reform legislation is that it 
protects the access to the latest broadband technologies for the 
greatest number of Americans, including the poor, urban and minority 
communities within a provider's entire service footprint.
	Finally, non-discrimination provisions must have teeth.  
	Indeed, the old saying that -a right without a remedy is no 
	right at all- is clearly applicable here.  Federal and state 
	enforcement authorities must therefore have the explicit 
	authority to revoke licenses of any telecom or cable provider 
	that impermissibly discriminates in the provision of new 
	advanced broadband and video services.  
I believe that Congress can pass legislation that will reform the 
process without doing damage to protections that have been in place 
for nearly 20 years, and which serve as the only meaningful national 
broadband policy in place today.  But video franchising legislation 
without enforceable protections and oversight will set our 
communities back decades in an age of information technology and 
global competition where none of us - least of all Hispanic 
Americans -- has a moment to lose. 

	Mr. Upton.  Ms. Johnson?
Ms. Johnson.  Thank you, Mr. Chairman and members of the committee.  
The invitation today to speak to you regarding video reform is an 
honor.  The last time I had the opportunity to speak with many of 
you was about ten years ago, in my capacity as the Chair of the 
floor at a Public Service Commission.  At that point, we were 
considering the 1996 Act.  I say that in a twisted way, this 
proceeding is a celebration of your success.  I know that you may 
be feeling like victims of your own success.  But Congressman 
Stearns said it well, when he spoke of the progress that this 
Nation has made under the leadership, our Federal leadership in 
implementing laws that allowed for the continued advanced 
communications development in information innovation, and 
infrastructure.  Rapid introduction of video competition 
epitomizes that continued success.
	Allow me to tell you a bit about the Video Access Alliance.  
	We are a not-for-profit organization dedicated to promoting 
	policies that encourage rapid deployment of innovative new 
	video platforms.  We serve as an advocacy and advisory 
	group for independent, emerging and minority networks, 
	content providers, programmers, entertainers, and industry 
	participants.  We are not against cable.  We are not against 
	the telephone companies.  Unfortunately for consumers, much 
	of the current debate has turned on a cable versus telecom 
	fight.  Much of the dialogue has focused on the policies and 
	the benefits of competitors.  We firmly believe that the 
	focus should consistently, and relentlessly, be on the benefits 
	to consumers.  The Alliance is focused on ensuring that there 
	are multiple platforms for the distribution and expansion of 
	more robust content, at lower prices for Americans, and our 
	everyday consumers.
	Allow me to elaborate.  Creating an environment that allows 
	for rapid investment and deployment in new video platforms 
	will have a compounding consumer benefit.  That is to say, 
	competition will lead to the underlying video distribution 
	providers offering lower prices for that carriage.  
	Additionally with competition, there will be a need for 
	networks to distinguish their offerings, which will allow for 
	more diverse and higher quality content.  Furthermore, 
	competition and programming in the content space will lead to 
	more competitively priced programming, providing independent 
	channels entering the market, and that will allow for downward 
	pressures on affiliate channels.  The results will be 
	extraordinary savings for consumers, higher quality 
	programming, and greater choice for all consumers.
	We all recognize that the current market environment denies 
	these full benefits to consumers.  The facts are undeniable.  
	Independent networks as a group are summarily excluded under 
	the current structure.  Recent research indicates that under 
	the current market structure, the top video distribution 
	networks carried on a non-premium national basis is less than 
	one percent of channels with no media affiliation.
	The only way to ensure diversity of information sources, 
	lower prices for cable TV, higher quality programming, and 
	more consumer choice is to create an environment that allows 
	for rapid deployment of more platforms with greater choice.  
	We believe that new choice and programming is just one of the 
	benefits of reforming our video franchise laws.  Equally 
	important to minority communities is that, and to the minority 
	communities that our coalition members serve, are the 
	technological advances and increased capabilities that 
	competition will create.  As a great number of our members are 
	minorities, or are focused on minority markets, the issue of 
	availability of these offerings to our community is 
	tremendously important to us.
	The Alliance believes that the best way to ensure networks are 
	built and are available to all is to allow the markets to work.  
	Giving minority consumers enormous buying power, minority 
	consumers will be particularly attractive to all providers in 
	the video distribution marketplace.  Minority consumers have 
	been shown in recent studies to spend more on media products 
	and services than other demographics.  We over indexed in each 
	category.  We support the comments made earlier by Congressman 
	Rush, as he talked about the need for anti-discriminatory 
	standards and enforcement mechanisms.  We look forward to 
	working with you in those endeavors.
	I applaud you again for your efforts, and I ask that you 
	continue to make video franchise reform a priority this year.  
	Thank you.
	[The prepared statement of Julia Johnson follows:]

Prepared Statement of Julia Johnson, Chairman, Video Access Alliance

Good morning Mr. Chairman and members of the committee. Thank you for 
your invitation.  I am Julia Johnson, Chairperson of the Video Access 
Alliance.  I am honored today for this opportunity to speak to you 
about video franchise reform.  We applaud your leadership and action 
in working on this very important issue.
First I would like to tell you briefly about the Video Access 
Alliance.  We are a not-for-profit organization dedicated to promoting 
policies that encourage rapid deployment of innovative new video 
platforms.  We serve as an advocacy and advisory group for independent, 
emerging and minority networks, content providers, programmers, 
entertainers and other industry participants.  We believe that as more 
platforms with greater capacity to carry programming are deployed, 
our independent and innovative voices-minority in particular-can be 
heard.  Our coalition consists of entrepreneurs and executives from 
several different independent networks including ImaginAsian TV, 
MultiChannel Ventures, The Employment & Career Channel, The America 
Channel, and the Black Television News Channel, LLC. 
We are on the consumer's side. We are on the entrepreneur's side.  
We are on the side of economic development for our communities.  We 
believe that all consumers, particularly minorities, have the most to 
gain from expanded video platforms.  
We are not against cable.  We are not against telephone companies.  
Unfortunately for consumers, much of the current debate has turned 
into a cable versus telecom fight.  Much of the dialogue has focused 
on polices that benefit competitors; we firmly believe the focus 
should consistently and relentlessly be on the benefits to consumers.
The Alliance is focused on ensuring that there are multiple platforms 
for the distribution of expanded and more robust content at lower 
prices for America's everyday consumers.  
We believe that consumers deserve more choices for their TV and 
entertainment services.  We strongly support the need for more video 
distribution systems and encourage the use of advanced digital 
technologies and broadband deployment into communities to bring 
consumers innovative options.
We support greater competition in the video delivery market-and 
we're hopeful this legislation will do just that.  We would like 
to see telecommunications companies expand their video networks as 
quickly as possible.  We'd like to see the cable companies expand 
their networks as quickly as possible.  Doing so could serve as an 
extraordinary opportunity for minorities and other entrepreneurs.  
And we again applaud the committees' efforts in working to do so.
Competition will super-charge the video delivery market and have a 
favorable economic impact on our economy.  In a competitive and open 
market, video distribution networks will provide more opportunities for 
independent programmers to distinguish their service from their 
competitors. This will lead to greater content choice for consumers. 
The FCC found that cable television providers offer at least 6 percent 
fewer programs in the absence of competition.  The mere presence of 
competing providers would give independent networks-like my 
members-more opportunities and give consumers greater choice.  In 
fact, already we're seeing new channels come online and programmers 
reach new audiences-we need to accelerate that process.
We believe that new choice in programming is just one benefit of 
reforming our video franchise laws. Equally important to the minority 
communities that many of our coalition members serve are the 
technological advances and increased capacity that competition would 
undoubtedly create.  When competing companies vie over customers, they 
create a storm of innovation.  We strongly believe that innovation, 
open markets and fair competition will encourage investment in 
infrastructure that will allow for the new applications and 
distribution models.  These applications, many of which have yet to be 
invented, will bring opportunities like distance education, global 
commerce and telemedicine closer to all consumers.  These are 
innovations that can truly change lives.  
Ultimately video franchise reform will provide the incentives for new 
networks with capacity that we can't even envision today.  
	As a great number of our members are minorities or focus on 
	minority markets, the issue of availability of these new 
	offerings is of tremendous importance to our supporters.
We have a unique interest-both socially and economically-to ensure 
that consumers have access to all the amazing innovations video 
franchise reform will bring.   
We believe that the best way to ensure networks are built and 
available to all is to let the markets work.  Given minority 
consumers' enormous buying power, we firmly believe that minority 
consumers will be particularly attractive to all providers in the 
video distribution marketplace.
Minority consumers have been shown in recent studies to spend more 
on media products and services than other demographics.  According 
to a study by Horowitz Associates, minorities are the top subscribers 
to premium channels and have higher penetration rates for digital 
television.  
A market-driven solution, as proposed in the legislation, is the best 
solution to ensure all consumers benefit from video franchise reform.  
In sum, the more choices consumers have the better.  We believe that 
expanded video distribution networks will result in lower consumer 
prices, higher quality consumer programming and greater consumer 
choice.  Moreover, we know that with this expansion come greater 
opportunities for independent, minority and emerging networks to be 
distributed into all communities.
I again applaud your efforts and ask that you continue to make video 
franchise reform a priority this year.  
Thank you for inviting me to testify today and I would be happy to 
answer any questions you may have.        

	Mr. Upton.  Thank you.  Mr. Riddle?
Mr. Riddle.  I thank you, Chairman Upton.  I would also like to thank--
	Mr. Upton.  Is that mic button on, just make sure.
	Mr. Riddle.  --the entire committee for having us here, the 
	sub-committee, and I would also like to give out a special 
	thanks to staff who have spent a lot of time with us over the 
	past few months working with you.  
	I represent the Alliance for Community Media, which for 
	30 years has represented the interest of the public 
	educational and government access community in the United 
	States.  The Alliance members are localism in action, but we 
	are tied to two communities, both civic and corporate.
	First, we represent 3,000 channels, 250,000 organizations, 
	1.2 million volunteers that use those channels every year.  
	We are the local election debate.  We are participants in 
	the local budget process.  We are the town council meeting 
	and the land-use hearing.  We are tens of thousands of 
	religious organizations, which find their only outlet on PEG 
	channels.  We are you.  Many of your colleagues use our 
	channels frequently to get their message out to the community 
	on an unfiltered basis.  But we are equally bound to the 
	visionary pioneers of science and industry who have created a 
	bridge work of light, sound, data, and dreams that can connect 
	communities of like spirited people.  We are bound to the 
	economic success of giant corporations who vie to deliver our 
	dreams, and to the freedom of millions of small innovators who 
	blaze a trail to the future.
	We would like to thank you for the wonderful work that has been 
	done on this bill.  There are many things that we can be 
	thankful for that are in the bill, namely, the interconnection 
	language that governs interconnection between the PEG 
	facilities and the new providers.  If that wasn't there, then 
	there would be the possibility that new providers would 
	actually be a source of extra expenditure to the PEG community.
	We appreciate the language around marketing and promotion.  
	And we particularly are pleased to see that there is funding for 
	PEG based on gross revenues.  The one percent funding for PEG is 
	a good first step.  We have some members which will not be made 
	whole by that because they do have agreements that were 
	previously created that exceed the one percent.  But we are 
	glad to see that we have moved in this direction.
	Some of those benefits that our members have are the result of 
	processes that included a community-wide public needs 
	assessment, and numerous public meetings.  And we ask that 
	such an engaging political process be supported by 
	grandfathering of agreements that were derived from that.
	There would be some difficulty in smaller towns and rural 
	areas, or other communities that have opted to devote more 
	resources to PEG.  There is a level of funding below which the 
	doors just don't open.  For this reason, the Alliance has 
	prepared a sliding scale national standard for funding large 
	and small communities.  PEG support would be paid to the 
	municipality on an inverse basis according to gross revenues.  
	That is just a way of saying that if you have a very small 
	community with very low gross revenues, the one percent might 
	not make it, although it would be very useful in a large 
	community like New York.  The national standard sliding scales 
	distribute resources according to local community needs.
	We ask that the franchise fee revenue base not be reduced, and 
	we are in complete agreement with the League of Cities and the 
	Cities Group on this matter.  We think it is a good idea that 
	new video competitors match the existing number of PEG 
	channels in most cases.  It saves negotiation time and offers a 
	level playing field.  There are a few suggestions we would make 
	though.  The language of the bill covers two cases of channels, 
	and those of the existing incumbent and those where there is no 
	incumbent, and therefore no channels.  But it doesn't cover the 
	situation where there is an incumbent but no channels, and 
	offers no ability to negotiate for those channels in the 
	future.  So we would like to direct the subcommittee to look at 
	the standards that we suggest for use in those communities 
	where there are currently no PEG channels.  Our suggested 
	national standard for PEG channel capacity uses a bell curve, 
	in which the vast majority of systems would have four PEG 
	channels.  The needs of both smaller and large communities are 
	met by a balanced market based test.
	We ask Congress to either adopt such standards or ask that the 
	FCC consider the Alliance's national standard sliding scale in 
	any proposed rulemaking on PEG channel capacity.  The Alliance 
	also feels that there must be clear language governing IPTV 
	and how that affects channel capacity and funding.  Fixing PEG 
	at a reasonable percentage of bandwidth based on current 
	channel allotments, eliminates this tendency to redefine PEG 
	out of existence and prevents PEG capacity from being reduced.
	A brief word on network neutrality.  We do have at least a 
	passing interest in this, since we expect that most of the PEG 
	channels will be within the IPTV, or the Internet part of the 
	bandwidth at some point.  And we don't want to be left behind 
	in a slower part of that system.  We do have an interest in 
	stronger language on build-out or redlining, although we don't 
	have technical ideas on how that should be done.  But our 
	interest is that nobody be left out of the kinds of 
	conversations that PEG offers, and those folks that are not 
	receiving the services will not be able to participate.
	And I would just point to one quick piece on the Texas 
	legislation and an unintended consequence that happened in 
	San Antonio where the franchise ran out about the same time 
	as the law went into effect.  And there was unintended 
	consequence of the PEG channels going dark immediately.  We 
	would like to see the language in your bill constitute a 
	minimum below which State laws could not drop.
	And you know again, we would like to recognize the hard work 
	that has brought us to this point.  We reaffirm our permanent 
	relationship with the big cities and the small towns in which 
	we live, and the governments, including the Congress, which 
	we as free people have chosen to represent our interests.  We 
	hope you will continue this conversation with us, as we 
	together design not a television system, but a brave new 
	world.
	We welcome your comments and questions.
	[The prepared statement of Anthony Thomas Riddle follows:]

 Prepared Statement of Anthony Thomas Riddle, Executive Director, 
 Alliance for Community Media



	Mr. Walden.  [Presiding]  Mr. Riddle, thank you for your 
	testimony.  Ms. Kenney, welcome and we look forward to your 
	comments.
Ms. Kenney.  Thank you.  We very much appreciate the opportunity to 
testify today, and I am testifying on behalf of the Consumer Federation 
of America, Consumers Union, and Free Press.  We are glad to be here 
particularly since, as Ms. Johnson noted, this battle really has been 
presented to you as a pitched battle among industries.  And while 
they have a lot of stake in this fight, and it is a good sport to some 
to fight over who cares about consumers more.  At the end of the day, 
consumers will be the ultimate winners or losers of this.  And what 
you do here matters very much in that outcome.  We are very grateful 
for your interests in promoting new video competition to provide 
consumers with some great relief from skyrocketing cable prices that 
have increased anywhere from 64 percent or more, depending on which 
number you pick over the last ten years.
Regardless of the number, we know that number is high, and we know 
the increases are the result of the market power of the cable 
monopolies who force consumers to pay more each year for bigger 
bundles of channels that many of them never watch.  So we know we 
need new competition in cable, and we are eager for it.  We look to 
the video franchising debate, and the interest of the Bells in 
providing video services as an opportunity for at least a second 
wire line competitor in cable.
	And as Ms. Blackburn noted, this is also about broadband.  
	This is about bringing broadband access to people who don't 
	have it right now.  And while two providers are better than 
	one, more are needed.  And without strong network neutrality 
	policies, the opportunity for video competition offered over 
	the Internet will be lost.  That concern is made even greater 
	by FCC's DSL and cable modem order.
	So having said that, we believe this is the time for the 
	committee to be looking at the video franchising process, 
	and to balance the consumer needs and community interest 
	against the need for new entrants, and create strong 
	enforceable network neutrality policies.
	Having said that, we believe that the Act before the committee 
	fails on both counts.  We also believe those problems can be 
	solved.  We are grateful for the inclusion of provisions that 
	protect the right of communities to offer their own broadband 
	services.  But we fear that under this bill Americans who are 
	already frustrated with their cable TV prices, basic service, 
	and limited choices will get more of the same or worse.  
	Rather than promote competition in a manner that will benefit 
	all consumers, it rolls back protections they currently have 
	without any assurances that they will get new competition.
	Let me briefly highlight our concerns.  Obviously we are 
	concerned that there is no build-out requirement for telephone 
	companies that will allow them to effectively redline, picking 
	the wealthiest neighborhoods and leaving middle and low-income 
	families behind.  It releases the cable companies from their 
	obligations to build-out, to upgrade, and to provide for a 
	uniform restructure when the Bell company serves just one 
	consumer.  Consumers who don't get that service, don't get a 
	competitive service from the Bell company, get hit many times.  
	They don't have a competitive choice.  They may face higher 
	prices because cable is no longer obligated to provide for a 
	uniform rate structure, and they may have reduced service 
	quality.
The bottom line is that cable should not be released from its uniform 
rate obligations, from its build-out and upgrade obligations, unless 
the Bell competitors are required to build-out to the entire franchise 
area over a reasonable period of time.
	Let me talk to you just for a moment about network neutrality.  
	This issue in particular has been presented as a battle 
	etween big Internet companies and big telecommunications and 
	cable companies.  In reality, this is the one provision of the 
	bill that could most hurt consumers if it is not addressed.  
	Currently, the bill strips the FCC of its authority to do more 
	to protect consumers from network discrimination.  History 
	shows us that telecommunications and media giants will use 
	their network power to discriminate.  You don't need to look 
	much further than the media clips from the last few weeks to 
	see that that's happening.  Cable is complaining about 
	interconnection, Verizon is complaining about lack of access 
	to program carriage, and telephone companies are complaining 
	about their inability to get ads carried on cable television 
	networks.  They are different networks, but it is the same 
	incentive to block access to competitors.  The impact on 
	consumers will be enormous.  Innovation will be stifled 
	without solid network neutrality policies.  If the 
	telecommunications and cable companies provide for access tiers, 
	consumers will pay twice, because whatever the Internet 
	companies charge will be passed on to them eventually, and 
	there is an opportunity for competitive services offered over 
	the Internet. 
	Let me speak briefly about bundling.  This was a concern that 
	Mr. Bass noted earlier today and Mr. Keefe alluded to.  One of 
	our significant concerns associated with video competition is 
	access to programming on a fair and competitive basis.  If the 
	Bell entrants do not have the ability to negotiate fairly for 
	program carriage, consumers will be left behind in terms of 
	opportunities for more competitive bundles, more competitive 
	prices, and more specialty tiers and so forth.  Until we 
	address anti-competitive bundling and tying arrangements 
	that the dominant program providers require currently of 
	distributors, you are going to have a difficult time.  It 
	will be very difficult for the new video distributors to offer 
	carriage in a manner that is competitive.  
	We do not think these concerns are insurmountable.  We think 
	they can be rectified with reasonable build-out requirements 
	for new entrants or in lieu thereof.  Resources for the 
	community to provide better broadband access for underserved 
	communities with higher competitive thresholds before cable 
	is released from its own build-out obligations and uniform 
	rate requirements, meaningful and enforceable network 
	neutrality provisions, and strong consumer protections that 
	are enforceable at the State and local level.
	Thank you.
	[The prepared statement of Jeannine Kenney follows:]

Prepared Statement of Jeannine Kenney, Senior Policy Analyst, Consumers 
Union

Summary
Consumers Union,Consumer Federation of America,and Free Pressappreciate 
the opportunity to testify on the issue of national video franchising 
and competition in video services. We welcome the Subcommittee's 
interest in fostering greater consumer choice by promoting competition 
in the concentrated cable marketplace. 
Consumers have suffered under monopolistic cable pricing that has 
resulted in a 64 percent increase in rates-approximately two and a 
half times the rate of inflation-since Congress deregulated the cable 
industry in the 1996 Telecommunications Act. In addition to 
skyrocketing rates, consumers have virtually no choice of providers 
or channel offerings. Satellite television, the primary competitor to 
cable, has had little price disciplining effect. In the few areas 
where actual facilities-based competition exists, consumers enjoy 
cable prices that are 15 percent lower than non-competitive markets. A 
national franchise system with strong consumer protections and 
appropriate provisions to meet local needs could foster new video 
competition and discipline ever-rising cable rates. 
Unfortunately, the Communications Opportunity, Promotion and 
Enhancement Act not only fails to ensurethe national franchising 
system it createswill benefit consumers, it almost surely represents 
a significant step backward. While the legislation laudably protects 
community rights to establish broadband networks, it eliminates other 
protections that ensure all residents have access to competitive, 
advanced communications services. The legislation abolishes 
communities' authority to ensure all residents are served by new and 
existing cable providers without establishing any federal build-out 
requirements in its place, opening a wide door to redlining. It rolls 
back state and local authority to establish and enforce consumer 
protections without requiring new, strong federal protections. Andit 
strips the Federal Communications Commission of its authority to 
establish rules ensuring that broadband network owners do not impair 
or block consumer access to competitive Internet content, services or 
applications. Moreover, enforcement provisions within the legislation 
are weak or absent. In short, the legislation not only fails to ensure 
that consumers will benefit from new video competition, it may expose
them to the risk of higher cable rates, reduced quality and reduced 
access to competitive choices offered via the Internet. 

Consumers who most need competition will be the least likely to receive 
it because the legislation does not require new cable providers 
	operating under a national franchise to serve all consumers 
	within a franchise area, new entrants will be free to offer 
	service to only wealthy neighborhoods, leaving behind middle and 
	low-income consumers who most need cable rate relief. It also 
	eliminates the existing authority of communities to require that 
cable providers serve all residents something virtually every 
franchising authority has done. To ensure that the benefits of 
competition come to those who need it most, the legislation should 
 require telephone companies entering the video market to build out 
their services to all consumers within a franchise area over a 
reasonable period of time, with appropriate accommodations for very 
low-density areas. This is not only critical to ensure video competition 
will discipline cable rates, it is also central to reversing the alarming
 trends in the broadband market. Next generation cable services bring
 broadband as well. Absent a build-out requirement, underserved areas 
will be permanently stranded on the wrong side of the digital divide. 
	Skepticism that telephone companies will offer their video 
	services to all residents rather than just the wealthiest is 
	particularly warranted given SBC's statements last year that it 
	would roll out Project Lightspeed, the company's IPTV video 
	offering, to 90 percent of its high-value customers. It defined 
	"high-value" customers as those willing to spend up to $200 on 
	communications services per month. They make up just 25 percent 
	of SBC's subscriber base. SBC also contended it would provide 
	the video service to just 5 percent of low-value customers that 
	constitute 35 percent of its customer base. Assurances that 
	"low-value customers" would still be able to receive satellite 
	video through SBC's affiliation with Dish Network ring hollow, 
	given the failure of satellite to provide meaningful price 
	discipline. Instead, SBC's statements suggest it will offer 
	services only in largely affluent areas, disregarding 
	communities made up predominantly of low- or middle-income 
	consumers. 
	Similarly, Verizon's conduct to date strongly suggests it is 
	seeking franchise agreements for its FiOS service in only the 
	wealthiest counties in the country. For example, Verizon has 
	negotiated or signed franchise agreements with largely affluent 
	local franchise areas-such as in Fairfax County, Va. (where it 
	has four franchise agreements in place for Herndon, Fairfax 
	County, Fairfax City and Falls Church); Howard County, Md.; 
	Massepequa Park in Nassau County, N.Y.; Nyack and South Nyack, 
	in Rockland County, N.Y.; and Woburn in Middlesex County, Mass. 
	In terms of median family income, Fairfax County ranks No.1 
	nationally; Howard ranks fourth; Nassau 10th;  Rockland 12th 
	and Middlesex 17th.New Jersey, in which Verizon is seeking a 
	statewide franchise but resisting state-wide build-out 
	requirements, is home to 12 of the top 100 richest counties in 
	the nation. 
	Verizon has agreed to universal or nearly universal build-out 
	requirements in several of its franchise agreements. Given the 
	wealth of those areas and the current authority of those 
	franchise authorities to require build-out, Verizon's 
	agreement reveals little about whether the company will 
	voluntarily build-out to all parts of mixed-income franchise 
	areas, assuming it even enters them. What those commitments do 
	show is both that build-out has been important to those 
	localities and that it need not be a barrier to the company's 
	entry. On the contrary, Verizon has quickly negotiated 
	agreements that offer substantial community services and 
	consumer protections. 
	SBC's lightly veiled admission of its plans for economic 
	redlining and Verizon's video franchising practices suggest new 
	entrants will enter only largely affluent, densely populated 
	franchise areas and that if they enter mixed-income franchise 
	areas (those with both high and low income populations), 
	they'll provide service only to portions of those markets 
	unless required to serve all residents. 
	To effectively enhance competition and ensure that its benefits 
	come to all consumers, any national franchising legislation 
	must require new entrants to build-out their services to all 
	consumers over a reasonable period of time. Particularly in 
	areas where telephone companies already have facilities, 
	build-out should be timely and mandatory. 
	In the absence of national build-out requirements, Congress 
	should establish financial incentives for new entrants to serve 
	the entire community. Telephone companies that do not agree to 
	serve the entire community should be required to provide 
	sufficient financial resources to local communities, in 
	addition to reasonable rights-of-way fees paid, for use in 
	fostering alternative means of ensuring broadband competition. 
	Those resources could be used to establish community broadband 
	networks, competitive commercial services to areas unserved by 
	the new entrant, or other means of assistance to help 
	low-income consumers access advanced telecommunications 
	services at affordable prices and meet local community 
	communications needs. 

Consumers May Be Denied Service Upgrades By Incumbent Cable Providers
	The legislation allows incumbent cable providers to jettison 
	the build-out and upgrade requirements to which they are bound 
	under local franchise agreements whenever a new market entrant 
	offers service to just one household in the franchise area. If 
	a telephone company offers its video service in only part of 
	the franchise area, as they are allowed to do under the 
	legislation, an incumbent cable provider will have both the 
	ability and the financial incentive to offer service upgrades 
	to competitive areas while denying them to customers in 
	neighborhoods not served by the new entrant. Even the National 
	Cable and Telecommunications Association has pointed out the 
	importance of providing network upgrades in an equitable and 
	non-discriminatory manner.Unfortunately, under the legislation, 
	incumbent cable providers will be under no obligation to do so, 
	and the communities they serve will be stripped of their 
	ability to require non-discriminatory upgrades. Even more 
	troubling, a cable incumbent operating under a national 
	franchise would be equally free to withdraw service entirely 
	from neighborhoods it currently serves. 

Consumers May See Their Cable Rates Rise, Not Fall
	The legislation also fails to protect consumers from 
	discriminatory pricing that may result when local exchange 
	carriers begin offering video service in a franchise area. 
	Under current law, cable providers need no longer comply with 
	the statutory requirement that they charge uniform rates across 
	the franchise area once a common carrier offers video service to 
	just a single household in that area. The legislation does 
	nothing to change that. Therefore, under the legislation, an 
	incumbent cable provider could lower rates in areas served by
	new competitors and raise them elsewhere to offset discounts. 
	And regardless of how limited the competition, cable is given 
	free-reign to price discriminate. Consumers who are not served 
	by the new Bell competitor would be hit twice-they will lack a 
	competitive alternative to the incumbent and they may face 
	higher cable rates and declining service quality. If Congress 
	does not require that new entrants build out to the entire 
	ranchise area, it must, at a minimum, require that cable 
	incumbents maintain a uniform rate structure until uptake of 
	competitive telecommunication video services reaches a 
	significant threshold.  

Anti-Redlining Provisions Are Insufficient To Ensure Low- And Middle 
Income Consumers Are Not Left Behind
	The legislation appropriately prohibits redlining based on 
	income. Unfortunately, in the absence of build out 
	requirements, the anti-redlining provision, on its own, will 
	be not be sufficient to ensure low-income areas will be served 
	by new video providers. Existing Title VI anti-redlining 
	provisions have only been effective because they exist in tandem 
	with the ability of local franchise authorities to require 
	service throughout the franchise area over time. Without 
	requirements for build-out, anti-redlining provisions are 
	toothless. 
	Moreover, redlining, particularly as defined in this bill, 
	will be difficult to prove and violations will be difficult to 
	enforce. So long as the burden lies with authorities to prove 
	that income is the sole reason a cable company has denied 
	service or upgrades, the anti-redlining provision will be 
	largely symbolic. Providers may justify failure to provide 
	service to particular neighborhoods based on insufficient demand 
	or economic infeasibility. Therefore, any anti-redlining 
	prohibition should place the burden of proof on cable providers, 
	not local, state or federal authorities. That is, the providers 
	should be required to prove that service denial is justified for 
	reasons other than income. 
	The legislation should also provide for concurrent 
	anti-redlining enforcement by states and localities and include 
	strong penalties for violations. Localities, in particular, 
	have specific knowledge of local economic circumstances; a 
	providers' service history in the community; and other knowledge 
	that allows them to identify redlining concerns. They are also 
	more accountable and responsive to their citizens than federal 
	regulators and are more likely to take timely action to resolve 
	redlining concerns. 
	In addition, to improve the effectiveness of anti-redlining 
	enforcement, the legislation should require the FCC to collect 
	data that will allow enforcement authorities to identify 
redlining violations. Currently, FCC lacks data that would help 
identify patterns of service and potential redlining in broadband 
the technology over which telephone companies will deliver video 
 services. Additional reporting requirements and analysis should be 
part of the systematic process of oversight. Cable service providers 
should be required to submit regular reports about the location, 
density, and level of service offered in each franchise area. Finally, 
the bill should provide for cross-tabulation of census data with the 
cable service provider reports to identify.

Consumer Protections Are Weakened
	Under current law, states and localities have authority to 
	establish more stringent cable customer service standards than 
	required by federal law. Localities are able to enforce those 
	standards through the terms of and renewal process for their 
	local franchising agreements. Many franchise authorities have 
	staff and offices dedicated to resolution of cable complaints 
	that provide for speedy resolution of customer billing concerns, 
	service outages and more. Penalties in the form of liquidated 
	damages or mandatory discounts for customers harmed by a 
	provider's violation of customer service standards are not 
	uncommon. 
	The Communications Opportunity, Promotion and Enhancement Act 
	strips states and localities of their authority to both establish 
	and enforce consumer protections that exceed the federal minimum 
	standards and gives enforcement authority solely to FCC, 
	significantly weakening consumer protections. States and 
	localities will have only the ability to issue compliance orders 
	when providers violate Commission standards. They can take no 
	enforcementaction of their own unless FCC regulations so 
	prescribe, raising serious concerns about the timeliness and 
	resolution of complaints. Communities, now empowered to resolve 
	customer disputes with their cable provider, would be left with 
	only the ability to issue compliance orders that FCC alone may 
	enforce. 
	Any national franchise legislation should retain state and 
	local authority to establish customer service standards and 
	consumer protections. Consumers must have a means for timely 
	and local resolution of complaints against their service 
	providers. Federalizing consumer protection is neither workable 
	nor acceptable. The Federal Communications Commission is 
	ill-equipped to address billing, services and outages 
	complaints in a timely manner. Customer service, the process 
	for resolving complaints, reporting requirements and 
	accountability of providers to officials must remain local, 
	with appropriate and meaningful sanctions for violations.  At 
	a minimum, the legislation should provide for strong federal 
	minimum consumer protection requirements that reflect the more 
	stringent criteria established to date by states and localities 
	and provide states and localities with concurrent enforcement 
	authority. 
	Finally, the legislation inexplicably and immediately eliminates 
	the existing federal requirement that cable companies provide 
	consumers with 30-day advance written notice before changing 
	channel assignments. This uniform and common sense provision 
	helps reduce consumer confusion and improves the accountability 
	of cable providers. Even on the theory that competition under a 
	national franchise may help discipline anti-consumer practices, 
	under the legislation as drafted, many consumers in a given 
	market will be without that competitive alternative. In fact, 
	even if a telephone company offers service to just one household 
	or one neighborhood, the dominant incumbent cable provider in 
	that franchise area could seek a national franchise and be 
	released from the written notice provision. Congress should 
	maintain this commonsense consumer protection. 

Broadband Discrimination Protections Are Inadequate 
	It is critical that any video franchising legislation include 
	strong, enforceable network neutrality policies required to 
	protect consumers and preserve the Internet as a source of 
	innovation and competition. However, as drafted, the network 
	neutrality provisions in Section 201 of the Communications 
	Opportunity, Promotion, and Enhancement Act are inadequate to 
	protect consumers from network-owner discrimination against 
	competitive, Internet-based content, applications, and services. 
	Relying on the FCC's policy statement on network 
	nondiscrimination is insufficient. There is no mention in that 
	statement of protection against the practice many network 
	operators have announced they will undertake-dividing the 
	Internet into pay-for-play tiers of service, or "access 
	tiering." Unfortunately, the legislation not only fails to 
	provide for stronger protections than encompassed in FCC's 
	policy, it simultaneously strips the FCC of its rulemaking 
	authority to protect consumers from discriminatory network 
	practices and provides for only case-by-case enforcement of 
	FCC's already weak network neutrality policy.
	Services, content and applications delivered via broadband 
	offer consumers new opportunities for competitive 
	telecommunications and video services. But the telephone and 
	cable companies that dominate the broadband market have strong 
	incentives to shut out those competitors through access 
	tiering, by impairing transmission, or by prohibiting use of 
	devices or applications on their networks. To protect consumers, 
	Congress should pass clear legislation and require the FCC to 
	issue strict and enforceable regulations prohibiting 
	discriminatory practices. The enforcement process must be 
	timely and require the network operator to bear the burden of 
	proof. We must ensure that no entrepreneur is posthumously 
	vindicated by the FCC after a complaint process drags on for 
	months. In short, the FCC's authority must be expansive and 
	its direction clear. 
	As subscription video services are increasingly offered using 
	Internet-based technologies, maintaining the Internet as a 
	neutral platform on which network owners cannot discriminate 
	becomes even more essential. The Bells are not the only 
	providers who could compete with cable. Increasingly, "video 
	on demand" is being offered over the Internet, where consumers 
	can access movies or pay to watch a single episode of a single 
	program. As Congress considers ways to increase competition in 
	video services, it must not overlook independent Internet 
	content providers as a third competitor. But that source of 
	competition will be squelched without strong, enforceable 
	prohibitions on network discrimination. Both cable and 
	telephone companies can use their network control to 
	prioritize their own video content over others. 
	Moreover, a network neutrality policy that permits "access 
	tiering" virtually guarantees higher consumer prices. Recent 
	media reports describe operators' plans to create "access 
	tiers" of service that will charge Internet companies fees to 
	bring their products and services to subscribers. The fees 
	charged to content and service providers will inevitably be 
	passed onto consumers who have already paid for high-speed 
	access. Though this may be rational market behavior for 
	short-term return on investment, it is patently discriminatory 
	and reflects a fundamental change in the nature of the Internet. 
	Only those companies who can afford to pay for access will be 
	able to reach consumers, stifling innovation, impeding 
	competition and hiking end user costs. Hidden costs and 
	discriminatory prices are anathema to consumer interests.
		Ironically, both cable and telephone companies who now 
		object to strong network neutrality legislation have a 
		lengthy record of using their market control to 
		preclude competition. And in recent weeks, these same 
		players have complained about the discriminatory 
		practices of their own competitors. AT&T has complained 
		that Time Warner has refused to run telephone industry 
		advertisements supporting national franchising on its 
		cable network. Time Warner has filed complaints against 
		incumbent telephone companies over refusals to provide 
		interconnection for its VOIP services. And Verizon has 
		complained that Rainbow Media, and its parent company 
		Cablevision, are denying Verizon carriage of its 
		regional sports cable networks. The complaint explicitly 
		sites the discriminatory practices of a cable operator 
		using market power to eliminate competition. 
In each of these cases, the discriminating party is using its control 
over the network to preclude a competitor. There is every reason to 
believe the both dominant cable and telephone providers will likewise 
use their control over broadband networks to discriminate against 
Internet-based companies that offer services that compete with their 
own. 
	 With a strong network discrimination prohibition, the promise 
	 for competition in video will come not just from Verizon and 
	 AT&T, but from any other entrepreneurial company that offers 
	 video via the Internet in a manner more appealing to consumers. 
	 Without such a prohibition, however, that promise of competition 
	 and innovation will be lost.  

More Protections are Required to Ensure Community Needs Are Met 
	While the legislation includes requirements that any provider 
	operating under a national franchise meet basic obligations to 
	serve the community, we are concerned that the legislation falls 
	short in a number of areas. 
Institutional Networks: The legislation maintains existing obligations 
of incumbent cable companies to provide institutional networks (I-Nets) 
for schools, libraries and government buildings under their local 
franchise agreement, but makes no provision for communities who may not 
yet have an I-Net but have existing authority to negotiate for one. 
I-Nets have played an important role in providing communities with 
advanced communications services and have been critical in helping to 
bridge the digital divide. If localities are to be stripped of their 
ability to negotiate for these networks, any national franchise should 
also provide for national uniform requirements for I-Nets in communities 
that lack them. 
Local, Independent and Diverse Programming: The legislation laudably 
requires new entrants to carry any public, education and government 
(PEG) access channels already carried by incumbents under incumbent 
franchise agreements and provides for incremental improvements in 
capacity over time. But, as with I-Nets, it fails to establish a 
national minimum requirement for carriage of local, independent 
channels, leaving those communities who lack carriage of such channels 
currently, but retain authority to negotiate for them, with no 
recourse. The legislation could remedy this by establishing a national 
minimum carriage requirements in all franchise areas. 
	Moreover, while establishing national requirements for 
	financial support of institutional networks and public access
	channels, carriage of PEG channels, and local franchise fees, 
	the bill provides for no explicit enforcement of those 
        requirements. 
	The only penalty for noncompliance appears to be franchise 
	revocation a heavy hammer FCC 
	will be reluctant to bring down. 
	Currently, localities enforce 
	those provisions through their 
	franchise agreements. Communities 
	can prevent violation of franchise 
	agreements before they occur by 
	including penalties within their
	agreements. National franchise legislation must provide for 
	explicit enforcement of franchise conditions in a manner that 
	empowers communities and states to ensure the needs of
	communities are being met by video providers. 

To Foster Video Competition, The Legislation Should Include Prohibitions 
On Programmer Tying Arrangements
	In order for true price competition to emerge in multichannel 
	video markets, Congress must also address anticompetitive 
	tying requirements imposed by dominant media companies. 
	At the same time that the cable distribution market has 
	consolidated, concentration in video programming has increased 
	dramatically. Broadcast giants and cable programmers have 
	merged; broadcast and satellite distributors have merged; and 
	cable distributors increasingly offer their own programming 
	or have gained ownership stake in other video programmers. 
	The anticompetitive effects ofconcentration in video programming 
	decreases the likelihood that new Bell video market entrants 
	will be able to effectively compete on price and on channel 
	offerings.
	Program carriage contracts typically stipulate that distributors 
	offer several or all of the programmer's channelsin the most 
	widely viewed tier (usually the expanded basic tier), regardless 
	of consumer demand for them,and prohibit channels from being 
	offered to consumers individually or in specialty tiers. These 
	bundling requirementshave contributed to increased size and 
	price of the expanded basic tier, which has increased in cost 
	by two and a half times compared to the basic tier.
	Media companies can secure these commitments because of their 
	market power. Six media giants, including the top four 
	broadcasters, dominate the programming landscape, accounting 
	for three-fourths of the channels that dominate prime time.
	Four are networks (ABC, CBS, FOX and NBC) and two are cable 
	operators (Time Warner and Comcast). The networks use the 
	retransmission consent negotiations for carriage of the local 
	stations they own and operate to leverage local cable carriage 
	of their other channels.  These six companies also completely 
	dominate the expanded basic tiers and the realm of networks 
	that have achieved substantial cable carriage. These six 
	entities account for almost 80 percent of the more than 90 
	cable networks with carriage above the 20 million subscriber 
	mark. 
	Moreover, cable operators are majority owners of one-fifth of 
the top 90 national networks a substantial stake in the programming 
market. They also own minority stakes in other networks, as well. The 
 Government Accountability Office found that vertically integrated 
 distributors or those affiliated with media companies are more likely 
to carry their own programming, contributing to the size and cost of 
the expanded basic tier. These vertically integrated networks continue 
to have the largest number of subscribers,and are the most popular. 
Program ownership by dominant incumbent cable distributors also 
provides the incentive to withhold carriage of cable networks they 
own from competitive video distributors. This is the basis of 
Verizon's recent complaint against Rainbow Media and Cablevision 
over sports channel carriage. 
	Independent, unaffiliated cable distributors that do not own 
	their own programming have consistently expressed concerns 
	about exclusionary tactics, contractual bundling requirements, 
	and coercive retransmission consent negotiations that limit 
	their ability to respond to customer demand for more choice 
	in program packages and for lower prices. 
	It is therefore essential that Congress include in any national 
	franchise legislation provision that address anticompetitive 
	and coercive contractual requirements, including retransmission 
	consent abuse. Failure to do so will impede the ability of any 
	new video market entrant, including Verizon and AT&T, to compete 
	on price. They'll be forced to buy the same channels their 
	competitor is carrying; pay the same or greater licensing fees; 
	and offer the same packages. Worse, they will be precluded from 
	offering consumers channels individually or in specialty tiers, 
	rather than in a large and costly bundle, even though doing so 
	may give them an opportunity to differentiate their services 
	from the incumbent cable monopoly and respond to strong 
	consumer demand for greater channel choice.  
	
The Right of Municipalities to Provide Broadband Networks is Protected 
	We offer our strong and unqualified support for Section 401 of 
	the legislation, 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 and 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 401 ensures that communities that want 
	to foster broadband access are not precluded from doing so. 
	
Conclusion
	The need for greater competition in the monopolistic video 
	marketplace is an urgent one-but it has been urgent for a 
	decade. We urge Congress to take the time to consider the many 
	policy issues that must be addressed before abandoning the 
	fundamental consumer protections encompassed in current law. 
	These include mandatory build out requirements or in lieu 
	thereof resources to meet the needs of underserved consumers; 
	provisions that prevent cable providers from backsliding on 
	their current obligations to serve the entire community; 
	strong consumer protections with state and local enforcement 
	authority; prohibitions on anticompetitive contractual channel 
	bundling requirements that reduce consumer choice and prevent 
	product differentiation; and a strong enforceable prohibitions 
	on broadband network discrimination. 
	We thank the Subcommittee for the opportunity to testify and 
	look forward to working with you on legislation that promotes 
	competition in the video marketplace that benefits all 
	Americans. 
 
	Mr. Upton.  Mr. May? 
Mr. May.  Mr. Chairman and members of the committee, thank you very 
much for inviting me here to testify today.  I am Senior Fellow and 
Director of Communications Policy Studies at the Progress and Freedom 
Foundation, a non-profit, non-partisan research and educational 
foundation located here in Washington.
	During the past year, I have chaired PFF's Digital Age 
	Communications Act Project, the purpose of which has been to 
	draft a new model communications law.  While my views have 
	been informed by the work of the participants in the DACA 
	project and my PFF colleagues, the positions I express here 
	today are my own.
	When Congress passed the 1996 Act and I was glad Ms. Johnson
	actually referred back to it, it stated that it intended "to 
	provide for a pro-competitive deregulatory national policy 
	framework."  While the 1996 Act in my view should have been 
	much more unambiguously deregulatory and should have gone 
	further in creating a national policy framework at that time 
	due in part to the changes of law and policy brought about by 
	the Act and to an even greater measure to the rapid fire 
	technological changes enabled by the digital revolution.
	We now enjoy a communications marketplace characterized by 
	competition and convergence.  I do not have time today to 
	belabor this point by citing the readings of statistics or the 
	very latest news stories about new competitive entrance or new 
	services or new applications.  It should be sufficient to point 
	out that we live in a world in which firms that we still 
	sometimes call cable television companies provide voice 
	services to their subscribers at every increasing rates.  
	Companies we still call telephone companies are racing to 
	provide video services and competition with cable and 
	satellite television providers.  New market entrants like 
	Vonage, which calls itself the broadband telephone company, 
	utilize super efficient internet connection to carry voice 
	traffic.  Wireless providers we still call cell phone 
	companies integrate voice, video, and data for delivery any 
	time anywhere to a small screen, which you carry in your 
	pocket.  They now even distribute television programming.  And 
	popular websites such as those operated by Yahoo, Google, 
	Microsoft, and thousands and thousands more that are not as 
	dominant as those companies, but which have their own 
	intensely loyal viewers, compete with the traditional cable 
	companies and broadcasters, not to mention newspapers and 
	magazines for consumer's eyeballs.  While we may quibble 
	around the edges about degree, competition and convergence of 
	services are realities in today's communications marketplace.
	Now in my written testimony, I have outlined a broader program
	of more comprehensive communications reform.  But with the time 
	that I have available for the initial statement, I want to 
	focus on the broadband section of the bill because in the form 
	proposed, it has the real potential to cause substantial harm 
	to the broadband marketplace.  This section of course provides 
	that the FCC has the authority to enforce the four broadband 
	connectivity principles the agency adopted in August 2005.  In 
	essence, the FCC principles embody the bundle of access rights 
	that are commonly referred to as net neutrality mandates.  
	Congress should not enact into law any specific neutrality 
	provision mandating access rights and non-discrimination 
	obligations.  Assuming for the sake of argument that Congress 
	nevertheless is intent on doing so, any net neutrality-specific 
	provision should be revised in the manner that I will suggest.  
	The increasing competitiveness in the existing contestability 
	of the broadband marketplace makes it very unlikely that 
	broadband operators will take any actions of the type intended 
	to be prohibited by the net neutrality prohibitions.  If they 
	did and as we already heard this morning, thus far, essentially 
	they have not.  Broadband operators which, excuse me, consumers 
	would switch providers.  Broadband operations are in the 
	distribution business.  Consumers do not demand bare broadband 
	by itself.  They want the content that broadband distribution 
	provides.  If broadband operators are going to invest billions 
	of dollars building out new broadband networks, operators will 
	not find it in their interest to block, or impair, or degrade 
	subscribers from accessing services and content that the 
	consumers find valuable.
	It is also true that when broadband operators contemplate 
	investing billions of dollars in new high speed networks, the 
	ability to bundle distribution with content and to enter into 
	efficient business arrangements with unaffiliated content and 
	application providers may be crucial to providing the 
	incentive to invest.  And the ability of an operator to 
	differentiate its service from that of another operator may be 
	critical to the decision to invest in new networks and service 
	applications.
	Competitive markets often involve legitimate price and service 
	discrimination and network owners often are pursuing legitimate 
	technological or business objectives in particular cases when 
	they differentiate their services.  Take one example, I think 
	which illustrates this point vividly.  Clearwire is a new 
	wireless entrant into the marketplace.  Clearwire gave Bell 
	Canada exclusive rights to distribute VOIP over Clearwire's 
	new wireless broadband network in exchange for $100 million 
	investment by Bell Canada.  Would consumers be better off if 
	this discrimination were prohibited as it would be under any 
	neutrality provision and Clearwire's new network not be built?  
	I do not think so.  
	So I do not think Congress should enact a neutrality-specific 
	provision.  But if Congress is going to do so, it is very 
	important that it not enact a broad overly inclusive mandate.  
	To prevent this, the committee should incorporate into the 
	provision an unfair competition standard that should 
	explicitly tie the FCC's authority to enforce the broadband 
	principles to this unfair competition standard.  While the 
	preference in the bill for adjudicatory proceedings is 
	positive, alone it is not sufficient that the new law will 
	not be interpreted by the agency or by the courts on 
	reviewing the agency's decision in a way that is essentially 
	equivalent to traditional common carrier principles.  
The hallmark of common carriage is the obligation not to discriminate 
and charge reasonable rates.  Without the competition, without tying 
these principles to a competition base provision that looks at 
particular markets, the market structure and market power, it is very 
likely that these principles will be interpreted in a way that equates 
precisely with traditional notions of common carriage.
	When Chairman Barton asked all of the participants this 
	morning on the first panel this afternoon to define net 
	neutrality, we heard a bunch of different definitions.  But 
	Mr. Misener from Amazon, who is a proponent of net neutrality, 
	actually came close, I think, to having it right.  He said 
	basically that net neutrality is market power extended into 
	other markets.  But the way to deal with it is to ensure that 
	if there is going to be any determinations made, that they are 
	dealt with in adjudications, as you provided, and specific 
	circumstances looking at particular facts so the situations 
	like the Clearwire example probably would not constitute a 
	violation of net neutrality.
	Mr. Upton.  If you could sum up, you have gone four minutes 
	longer than the five.
	Mr. May.  Okay.  I am outnumbered here about four to one but I 
	will do that, thank you, Mr. Chairman.
	The way I would sum up is just this, that I think that what is 
	important for the committee to focus on as it goes forward is to 
	import into this bill notions of regulations that are tied very 
	specifically to competition assessments and standards.
	Thank you.
	[The prepared statement of Randolph J. May follows:]

Prepared Statement of Randolph J. May, Senior Fellow and Director, 
Communications Policy Studies, The Progress & Freedom Foundation

SUMMARY
	The Committee should be commended for the substantial progress 
	it has made since the earlier two staff drafts in proposing a 
	bill that will represent sound communications policy. 
	Especially with regard to the national cable franchise 
	proposal, in many respects the proposal furthers the worthy 
	intent stated by Congress when it passed the 
	Telecommunications Act to adopt a -pro-competitive, 
	deregulatory national policy framework.-
	As for the Broadband Policy section, it would be far 
	preferable for Congress not to include a net neutrality-specific 
	provision in the bill. There certainly have not been more than 
	a few scattered instances of alleged marketplace abuses. 
	Moreover, in the increasingly competitive broadband marketplace, 
	there is no reason to anticipate that broadband operators will 
	not be responsive to making available services that consumers 
	value. Assuming for the sake of argument that Congress is 
	intent on including a net-neutrality-specific provision, 
	however, it should explicitly tie enforcement of the FCC's 
	broadband principles to determinations made under a market-
	oriented unfair competition standard such as the one I suggest 
	in my testimony. Absent clearly tying FCC authority to a 
	competition-based standard that will require the agency to 
	undertake a rigorous fact-based economic analysis of the 
	particular marketplace circumstances that exist at the time, 
	there is a great danger that enforcement of the access mandates 
	at the core of the broadband principles will turn into a 
	general common carrier regime for broadband operators. 
	Extending the non-discrimination obligations and rate 
	regulation requirements that are hallmarks of a common carrier 
	regime, and which may have been appropriate in a monopolistic 
	narrowband era, to the competitive broadband era will certainly 
	stifle new investment and innovation and impose an overall 
	drag on the nation's economy.
	In light of the competition that already exists in the video 
	marketplace, and the potential for even more competition from 
	telephone companies and other new entrants, there is no longer 
	any rationale for local franchising authorities to play a 
	public utility-type economic regulatory role. This is true 
	for new entrants such as the telephone companies and for 
	incumbent cable operators alike. The proposal for a national 
	franchise will speed the development of further video 
	competition and, indeed, the deployment of new broadband 
	networks. At the same time, the Committee should consider 
	further improvements in the video section of the bill suggested 
	in my testimony, such as eliminating the PEG and institutional 
	network mandates.

Mr. Chairman and Members of the Committee, thank you very much for 
inviting me to testify today. I am Senior Fellow and Director of 
Communications Policy Studies at The Progress and Freedom Foundation, 
a non-profit, nonpartisan research and educational foundation 
located in Washington, DC. PFF is a market-oriented think tank that 
studies digital revolution and its implications for public policy. 
During the past year, I have also co-chaired our Digital Age 
Communications Age (-DACA-) project. The purpose of this project has 
been to draft a new model communications law. In order to carry out 
this purpose, PFF assembled into working groups a diverse group of 
leading academics and think tank scholars-lawyers, economists, and 
engineers-who are experts in the field of communications policy. The 
views I express here today have been informed by the work of the 
participants in the DACA project. But I want to emphasize at the 
outset that while my colleagues at PFF, and other participants in 
the DACA project, may share many of my views, the positions I express 
here today are my own.

Introduction
It has been ten years since enactment of the Telecommunications Act of 
1996. Recall that when Congress passed the 1996 Act, it stated that it 
intended -to provide a for a pro-competitive, deregulatory national 
policy framework designed to accelerate rapidly private sector 
deployment of advanced telecommunications and information technologies 
and services to all Americans by opening all telecommunications markets 
to competition.-  While I believe that the 1996 Act could have been 
much more unambiguously deregulatory, the fact of the matter is that, 
due in part to the changes in law and policy brought about by the act, 
and due in even greater measure to rapid-fire and ongoing technological 
changes enabled by the digital revolution, we now enjoy a communications 
marketplace characterized by competition and convergence. I am not 
going to belabor this point here by citing reams of statistics or the 
very latest (usually this morning's!) news story about a new 
competitive entrant or a new communications service or application. 
For my purpose today, it is sufficient to point out that we live in a 
world in which firms we still sometimes call "cable television" 
companies provide voice services to their subscribers at ever 
increasing rates. Companies we still call "telephone companies" or 
"telecommunications providers" are racing to provide video services 
in competition with cable and satellite television providers. New 
market entrants like Vonage, which calls itself "the broadband 
telephone company," utilize super-efficient Internet connections to 
carry voice traffic. Wireless providers we still sometimes call 
cellphone companies integrate voice, video and data for delivery 
anytime, anywhere to a screen you carry in your pocket. They now 
distribute popular -television- programming. And popular web sites, 
such as those operated by Yahoo, Google, Microsoft, and thousands 
and thousands more that are not as dominant but which have their 
own intensely loyal "viewers", compete with traditional 
broadcasters and cablecasters, not to mention newspapers and 
magazines, for consumers' eyeballs.
So while we may quibble around the edges about degree, competition 
and convergence of services are realities in today's communications 
marketplace. That being the case, any communications law reforms 
enacted should be consistent with the pro-competitive, deregulatory, 
and national policy goals Congress articulated in the 1996 Act, and 
it is against those objectives that I will consider the present bill.
Before addressing more specifically the bill before us, I do want to 
sketch briefly what I believe, ideally, communications reform 
legislation should include.In light of the realities of the current 
communications marketplace, ideally, Congress would jettison most of 
the current statue, that at its core is grounded in many different 
service definitions ("telecommunications", "information service", 
"cable service, "mobile service", and so on). These existing 
service definitions are based on what I have called -techno-
functional constructs.-I use this term because the service 
definitions are all tied to some combination of technical 
characteristics or functional capabilities. In a world of 
convergence driven by technological change, drawing distinctions 
for regulatory purposes between and among the variously-denominated 
services becomes a largely metaphysical exercise.
In today's digital age, this regime of so-called "stovepipe" 
regulation should be replaced by a new market-oriented regulatory 
paradigm based on competition law principles grounded in antitrust-
like jurisprudence enforced by the Federal Communications Commission.
Under the DACA proposal, most of the FCC's regulatory actions would 
be subject to an -unfair competition- standard-akin to the standard 
employed by the FTC under the Federal Trade Act. This unfair 
competition standard, which would be at the heart of the new 
communications law, would anchor the FCC's regulatory activities 
firmly in market-oriented competition analysis. I will say more 
about this proposed regime, which like antitrust law, makes 
competition and consumer welfare paramount, when I discuss Title II, 
the bill's broadband provision. Here I just want to add that, it 
light of the radical marketplace changes I have described, ideally
Congress would enact a comprehensive reform of the nation's 
communications laws that would include, in addition to the change 
in regulatory paradigm, (1) alteration of the division of 
jurisdictional authority that recognizes the increasingly national 
and international nature of communications; (2) reform of the 
universal service system of subsidies that recognizes the extent 
to which consumers in rural areas and low income consumers have 
opportunities to avail themselves of new, lower-cost communications 
technologies than those traditionally supported by the subsidies; 
and (3) reform of spectrum policy that recognizes that increased 
flexibility of use and more secure property-like rights leads to 
more efficient and consumer-welfare enhancing use of this valuable 
resource.

The Net Neutrality Provision
	Now I want to turn to the bill before us. Although it is 
	only two pages, I first want to address Title II, 
	"Enforcement of Broadband Policy Statement.- This section 
	is very important, in a fundamental sense, to the future 
	development of the broadband and Internet markets, and, 
	indeed, to the future of sound communications law reform. In 
	essence, this section provides that the FCC has authority to 
	enforce, through adjudications and not rulemakings, the four 
	"connectivity" principles the agency adopted in August 2005. 
	The bill provides that if "the Commission determines that 
	such a violation [of the principles] has occurred, the 
	Commission shall have authority to adopt an order to require 
	the entity subject to the complaint to comply with the 
	broadband policy statement and the principles incorporated 
	therein."
The FCC's September 2005 policy statement describes the broadband 
principles as follows: (1) consumers are entitled to access the 
lawful Internet content of their choice; (2) consumers are entitled 
to run applications and services of their choice; (3) consumers are 
entitled to connect their choice of legal devices that do not harm 
the network; and (4) consumers are entitled to competition among 
network providers, application and services providers, and content 
providers.(Note here that this last principle, as I read it, appears 
to extend the FCC purview to application and content providers, such 
as Google, EBay, and Yahoo, perhaps providing a basis for complaints 
to the FCC that the market segments in which they participate are not 
"competitive".) When adopted, the Commission characterized the 
principles as "guidance'-, not rules in the sense of positive law, 
although it said that -to ensure consumers benefit from innovation 
that comes from competition, the Commission will incorporate the 
above principles into its ongoing policymaking activities.-
The FCC's principles embody the bundle of access rights that are 
often referred to as "Net Neutrality" mandates. I want to explain 
first why it is far preferable for Congress not to enact into law 
any specific net neutrality provision mandating access rights and 
non-discrimination obligations. And then I want to explain why, 
assuming for the sake of argument that it nevertheless does so, 
any such net neutrality-specific provision, such as the one 
included in the bill, should be revised as I suggest below.
It is important to emphasize again here the increasing 
competitiveness, and the existing contestability, of the broadband 
marketplace, makes it very unlikely that broadband operators will 
take any actions of the type intended to be prohibited by the net 
neutrality prohibitions which consumers value. If they did, consumers 
would switch broadband providers. Broadband operators are in the 
distribution business. Consumers don't demand -bare- broadband by 
itself, of course; they want the content that broadband distribution 
provides. If they are going to invest billions of dollars building 
out new broadband networks, it is safe to assume that the operators 
will not find it in their interest to block or impede subscribers from 
accessing services and content that the customers find valuable.
It is also true that when broadband operators contemplate investing 
billions of dollars in new high-speed networks, the ability to bundle 
distribution with content, and to enter into efficient business 
arrangements with unaffiliated content and applications providers, 
may be crucial to providing the incentive to invest. In this regard, 
the ability of an operator to differentiate its service from that of 
another operator, or even in some circumstances to discriminate among 
unaffiliated providers, may be critical to the decision to invest in 
new networks and service applications. As the members of the DACA 
Regulatory Framework Working Group explained in a recent joint 
statement: -Competitive markets often involve legitimate price and 
service discrimination, and network owners often are pursuing 
legitimate technological or business objectives in particular cases.- 
To take one example, new broadband wireless entrant Clearwire 
apparently gave Bell Canada exclusive rights to distribute VoIP over 
Clearwire's broadband network in exchange for a $100 million 
investment by Bell Canada. Would consumers be better off if this 
-discrimination- were prohibited and Clearwire's new network not 
built? I don't think so.
In any event, although we have yet to see more than a handful of 
claimed instances of abuse occur, my purpose here is not to argue 
that, in today's environment, there might not be some instances in 
which, due to the particular marketplace circumstances, we ought to 
be concerned about discriminatory conduct or denial of access rights 
of the type encompassed by the FCC's broadband principles. Perhaps 
the oft-cited case involving Madison River, in which the dominant 
local telephone company allegedly refused to provide access to its 
network to independent VoIP providers is just such an instance. My 
purpose here is to suggest that it is important that Congress not 
enact a provision that is-or that even possibly will be turned 
into-a broad, overly-inclusive net neutrality mandate. Rather, if 
Congress insists on dealing with this issue in this bill, it should 
incorporate into the provision the unfair competition standard that 
is at the heart of PFF's DACA regulatory framework. And it should 
specifically tie the FCC's authority to enforce the broadband 
principles to violations of the unfair competition standard.
The bill already adopts one of the key elements of the DACA 
recommendation in that the Commission must proceed through 
adjudication in deciding whether the broadband principles have been 
violated. Because rulemakings, especially as the FCC has conducted 
them in the past decade or so, often are interminable proceedings 
that, when completed, lead to overly broad and vague anticipatory 
prohibitions, the bill's preference for case-by-case adjudications is 
very commendable. The Committee might consider imposing a time limit 
upon the Commission for deciding complaints to ensure that net 
neutrality-like complaints are decided in a timely fashion, and it 
might make clear that the agency has the authority, upon a strict 
showing that there is a substantial likelihood the complainant will 
prevail on the merits and will otherwise suffer substantial and 
irreparable harm, to issue administrative injunctive relief, pending 
the prompt final decision.
While the preference for adjudicatory proceedings is positive, alone 
it is not sufficient to ensure that the new law will not be 
interpreted by the agency, or by the courts upon review of the 
agency's decisions, in a way that is essentially equivalent to 
traditional common carrier principles.  Indeed, that is what the net 
neutrality advocates seek. The hallmark of common carriage is the 
obligation not to discriminate and to charge -reasonable- rates. In 
effect, it is a very short (or non-existent) leap from enforcing the 
principle that consumers are entitled to access any content of their 
choice to determining that the provider may not differentiate its 
service from another provider by favoring some content and applications 
over others. Such common carrier regulation may have been appropriate 
in an era generally characterized by monopolistic service providers, 
but it is not appropriate in today's competitive broadband environment. 
As explained above, in a competitive marketplace, imposing common 
carrier-like obligations stifles investment and innovation and puts a 
drag on the overall economy.
Therefore, the Committee should revise the broadband section to 
provide that the FCC may find a violation of the broadband principles 
only if it finds that the broadband operator has committed an unfair 
competitive practice. An unfair competitive practice should be defined 
as an act that presents -a threat of abuse of significant and 
non-transitory market power as determined by the Commission consistent 
with the application of jurisprudential principles grounded in market-
oriented competition analysis- such as that commonly employed by the 
FTC and the Department of Justice in enforcing the antitrust law. 
Incorporation of this competition standard will force the FCC to ground 
its decisions in rigorous economic analysis based on the marketplace 
realities at the time of the complaint. Under the specific circumstances 
of the case, the FCC would examine factors such as the number of 
existing and potential competitors, barriers to entry, technological 
dynamism in the markets at issue, and impacts on investment and 
innovation. Thus, for example, in a case such as Madison River, the 
agency might well find that that the complainant has proved an 
anticompetitive practice that should be remedied, while in the Clearwire 
example, the agency might well determine that under those circumstances 
that the exclusive arrangement does not constitute an anticompetitive 
practice. Moreover, if the agency does find that an unfair competitive 
practice has been committed, in the adjudicatory proceeding that the 
bill wisely envisions, it can tailor the remedy to fit the circumstances. 
So, in conclusion, if the broadband section is to remain in the bill 
despite my recommendation that it not be included, a competition 
standard such as I have suggested should be married with the requirement 
for case-by-case adjudications.
Video Competition
The section of the bill creating a national franchise for cable 
operatorsis a positive step that will further enhance and speed up the 
development of competition in the multichannel video market and, more 
broadly, the broadband market. Harking back to the stated goals of the 
1996 Act that I mentioned earlier-pro-competitive, deregulatory, and a 
national policy-the video section generally furthers those goals. 
Nevertheless, in light of the competition that presently exists and 
which will continue to develop, the Committee should consider going 
further to reduce the regulatory requirements applicable to the cable 
operators, especially in the area of content regulation, where the 
First Amendment rights of the providers are implicated. And, once it 
establishes a national framework for cable operators applicable to 
new entrants and incumbents, as much as possible, it should apply to 
them in like manner.
Competition in the video marketplace has been increasing steadily 
over the past decade or so. I went back and examined the FCC Annual 
Video Competition Report that was issued in January 2000. There, 
while noting that cable and satellite operators dominated the 
marketplace, the FCC stated that the following entities were also 
providing video programming alternatives in some places: wireless 
cable operators, SMATV systems, local telephone companies, Internet 
video, home video sales and rentals, and electric utilities. 
Obviously, not all of these entities (for example, electric utilities 
or local telcos) were meaningful competitors or even, at that time, 
exerted meaningful pressure on the market as potential competitors. 
But, looking ahead, it was easy for the FCC to conclude then that, 
"[t]he technological advances that will permit MVPDs to increase both 
quantity of service (ie., an increased number of channels using the 
same amount of bandwidth or spectrum space) and types of offerings 
(e.g. interactive services) continue.-
Fast forward to this year. In its 12th Annual Video Competition 
Report, the FCC recently concluded:
In this year's Video Competition Report, the FCC finds that the 
competitive MVPD market continues to provide consumers with increased 
choice, better picture quality, and greater technological innovation.  
The report concludes that almost all consumers may opt to receive 
video services from over-the-air broadcast television, a cable 
service, and at least two DBS providers.  In addition, a growing 
number of consumers can access video programming through digital 
broadcast spectrum, fiber to the node or to the premises, or video 
over the Internet.  Moreover, once consumers have selected a 
provider, technology such as advanced set-top boxes, digital video 
recorders, and mobile video services give them even more control 
over what, when, and how they receive information.  Furthermore, 
many MVPDs offer nonvideo services in tandem with their traditional 
video services.
	So, we have seen the video marketplace become increasingly 
	competitive over the past decade, due largely to 
	technological advances. But there is no doubt that the 
	market will become even more competitive-even more quickly- 
	if national franchises are available as an option to replace 
	the more than existing 30,000 local franchising authorities 
	("LFAs"). In the past, in granting and overseeing franchises 
	to cable operators, the LFAs played a role akin to a 
	traditional public utility regulator. While they served 
	other claimed purposes as well, such as managing the cable 
	operators' use of public rights-of ways and imposing social 
	obligations such as making available free of charge Public, 
	Educational, and Government (-PEG-) channels and 
	institutional facilities for government use, in essence the 
	LFAs primarily were seen by the local governments as a way 
	to constrain market power. This public utility-type 
	regulatory function demonstrably is no longer necessary. 
	Under a general national franchise regime such as that 
	proposed in the bill, the authority of the LFAs to manage 
	ROWs can still be maintained and properly constrained, and 
	Congress can make judgments concerning, whether in the 
	current and anticipated market environment, it is consistent 
	with sound policy to maintain the non-economic regulatory 
	social obligations.
While endorsing the national franchise approach, and commending the 
Committee for avoiding the imposition of unnecessary build-out 
requirements, here are some suggestions to consider for improving 
the bill further:
Once a decision is made to implement a national franchise regime in 
light of the changed competitive environment and lack of need for 
traditional economic regulation, it is not clear why the LFA should 
be able to petition to revoke a national franchise obtained by an 
incumbent cable operator if no new competitor provides service in 
the franchise area during a one year period. There is a sound 
policy basis for providing the national franchise option that is 
not dependent on whether a particular competitor enters or remains 
in the market.   
Again, in light of the changes in the competitive environment, it is 
time to consider eliminating the PEG and institutional network 
mandates. In an environment in which there are a multiplicity of 
information sources for educational and government programming 
activities, the rationale for maintaining that "cable operators", 
incumbent or otherwise, (as opposed to local newspapers, Internet 
sites, broadcasters, etc.) must turn over their facilities for 
PEG channels is very weak. Whatever the original merits of the 
extraction of these channels for public use, the purposes for 
which they are intended can be met-and almost certainly are being 
met today-in the free marketplace absent government compulsion. 
Certainly government mandates on private communications systems to 
carry particular types of programming implicates First Amendment 
free speech interests. And the PEG mandates, along with the mandate 
for continued support of the institutional networks of the 
localities implicates the property rights of the private operators 
under the Fifth Amendment. I suggest that, in the competitive 
marketplace environment that is now a reality, increased sensitivity 
to these free speech and property-rights constitutional 
considerations by Congress will also point the way towards sound 
communications law and policy.

Conclusion
The Committee should be commended for the substantial progress it 
has made since the earlier two staff drafts in proposing a bill that 
will represent sound communications policy. As for the Broadband 
Policy section, it would be far preferable for Congress to do 
nothing at all now to include a net neutrality-specific provision in 
the bill. There certainly have not been more than a few scattered 
instances of alleged marketplace abuses. Moreover, in the 
increasingly competitive broadband marketplace, there is no reason 
to anticipate that broadband operators will not be responsive to 
making available services that consumers value. Assuming for the 
sake of argument that Congress is intent on including a 
net-neutrality-specific provision, however, it should explicitly 
tie enforcement of the FCC's broadband principles to determinations 
made under a market-oriented unfair competition standard such as 
the one I suggest in my testimony. Absent clearly tying any FCC 
authority to a competition-based standard that will require the 
FCC to undertake a rigorous fact-based economic analysis on the 
particular marketplace circumstances at the time, there is a 
great danger that enforcement of the access mandates at the core 
of the broadband principles will turn into a general common carrier 
mandate for broadband operators. Extending the non-discrimination 
obligations and rate regulation requirements that are hallmarks of 
a common carrier regime and which may have been appropriate in a 
monopolistic narrowband environment to the competitive broadband 
era will certainly stifle new investment and innovation and impose 
an overall drag on the nation's economy.
In light of the competition that already exists in the video 
marketplace, and the potential for even more competition from 
telephone companies and other new entrants, there is no longer 
any rationale for local franchising authorities to play a public 
utility-type economic regulatory role. This is true for new 
entrants such as the telephone companies and for incumbent cable 
operators alike. The proposal for a national franchise will speed 
the development of further competition. At the same time, the 
Committee should consider further improvements in the video 
section of the bill suggested in my testimony.
 
ATTACHMENT A

The Digital Age Communications Act's Regulatory Framework 
and Network Neutrality
----
A Statement of the DACA Regulatory Framework Working Group 

Randolph J. May
James B. Speta
Co-Chairs

Kyle B. Dixon
James L. Gattuso
Raymond L. Gifford
Howard A Shelanski
Douglas C. Sicker
Dennis Weisman
Members

	One of the hottest issues in the current telecommunications 
	reform debate is the discussion of "Network Neutrality," 
	which generally refers to a nondiscrimination mandate for all 
	broadband Internet networks similar to the common-carrier rule 
	that applied to traditional telecommunications services in a 
	monopolistic era. Most of the legislative proposals for 
	telecom reform include a Network Neutrality rule,and the FCC 
	in 2005 issued a policy statement in which it backed a version 
	of Net Neutrality principles. The exception to this trend is 
	Senator Jim DeMint's "Digital Age Communications Act." 
	Senator DeMint's bill echoes much of the position taken by the 
	DACA Regulatory Framework Working Group. This release explains 
	the general structure of the DACA proposal, and explains why it 
	provides a better framework for dealing with Network Neutrality 
	issues.  In brief, DACA adopts an "unfair competition" standard 
	which is based on competition law and economics and which is 
	robust enough to deal with truly anticompetitive instances of 
	exclusion on the Internet, but without prejudging business 
	practices that may spur investment and deployment of new 
	facilities and services.  DACA's case-by-case approach to 
	Network Neutrality is superior, because it avoids thickets of 
	ex ante rules while maintaining the availability of ex post 
	relief.

	The DACA Regulatory Framework In General

	The DACA framework is designed to respond to two well-known 
	and, in our view, largely incontestable developments.  First, 
	communications markets are increasingly competitive.  
	Although that competition is not perfect and does not mirror 
	the stylized markets of microeconomics textbooks with very 
	large number of competitors, technological developments have 
	increased - and are likely to continue to increase - 
	competition in communications.  Second, those same 
	technological developments mean that service-based regulatory 
	categories - one kind of regulation for telecommunications 
	carriers, another for information services, and another for 
	cable services - are no longer sustainable.
	The DACA is a technologically neutral regulatory paradigm, 
	in that the Federal Communications Commission is given the 
	same regulatory authority over all electronic communications 
	networks.  That regulatory authority is two-fold.  The 
	agency's principal authority is to punish and prevent 
	-unfair methods of competition,- which is a phrase 
	intentionally borrowed from the Federal Trade Commission Act.  
	The core idea is to punish and prevent practices that violate 
	competition law principles (or that potentially would do so).  
	Thus, DACA charges the agency to condemn -practices that 
	present a threat of abuse of significant and non-transitory 
	market power- consistent with market-oriented competition 
	principles.
	Beyond the general incorporation of competition law principles, 
	DACA also states that it is an unfair method of competition to 
	substantially impede the interconnection of public 
	communications facilities and services in circumstances in 
	which the denial of interconnection causes substantial harm 
	to consumer welfare.  This -interconnection authority- is not 
	necessarily dependent on traditional antitrust doctrine.  Given 
	the result of the Trinko caseand the importance of 
	interconnection in communications markets, the DACA provides 
	separate authority for the FCC to order interconnection.  But 
	this authority, under DACA, must still be linked to a theory of 
	consumer welfare. It is important to recognize that net 
	neutrality is linked to the welfare of independent content and 
	applications providers, but not to a sound theory of consumer 
	or aggregate welfare. Even the most nuanced versions of network 
	neutrality limit a network's ability to charge an application 
	that imposes comparatively high costs on a network accordingly, 
	leaving the network to recover at least some of those costs 
	through subscription prices paid by consumers. Net neutrality 
	thus risks being regressive: relatively low use consumers 
	within a service tier may end up subsidizing those consumers 
	whose use imposes relatively high costs on the network.
	A last, general point about DACA:  the regulatory framework is 
	expressly tilted towards resolving competition problems that 
	arise through adjudication and ex post remedies.  The agency is 
	still given rulemaking authority, although it must meet a higher 
	evidentiary burden before promulgating rules.  But the statute 
	contemplates, and we prefer, the agency to act not through the 
	development of a thicket of rules, but through case-by-case 
	considerations.

	Net Neutrality Claims Under the DACA Framework

	Although there is some - indeed, it is fair to say, much - 
	disagreement about how a network neutrality rule would operate 
	in practice, such a rule is essentially an attempt to impose on 
	the Internet the sort of nondiscrimination rule that traditional 
	common carrier regulation has long imposed on telephone 
	companies.  The supposed point of network neutrality is to 
	ensure access for applications and content providers, against 
	the alleged incentives that network providers might have to 
	deny or degrade access to certain unaffiliated content and 
	services.
	DACA proposes to handle these issues without the necessity of a 
	specific rule, and without the need for a blanket rule that 
	tries to anticipate every imaginable harm, and which would 
	present opportunities for regulatory litigation.  Antitrust 
	law and economics has a well-developed body of learning about 
	acts of vertical foreclosure - which is what denials of access 
	would be. Network neutrality may be a new label, but it is just 
	a specific example of a more general competition issue with 
	which there is over a century of enforcement experience and 
	accumulated knowledge.  Antitrust analysis takes into account 
	the possibility of foreclosure, but also looks on a case-by- 
	case basis for justified or efficient business arrangements.  
	Competitive markets often involve legitimate price and service 
	discrimination, and network owners often are pursuing 
	legitimate technological or business objectives in particular 
	cases.  The -unfair competition- prohibition in DACA provides 
	sufficient authority for the FCC to condemn and prevent 
	anticompetitive violations of network neutrality.  Indeed, DACA 
	goes beyond antitrust law by giving the FCC authority to 
	regulate vertical interconnection where necessary to protect 
	consumers. For Congress to legislate such interconnection in 
	advance of actual market experience to justify its necessity 
	risks economic harm to consumers and producers-harm that has 
	not been adequately considered in the case for network 
	neutrality.  An ex ante approach to actual harm, backed by the 
	FCC's proposed authority under DACA, provides a more targeted 
	approach to real harms.  To take only the most famous case to 
	date of a Network Neutrality complaint, the Madison River 
	foreclosure of a competing VoIP provider,antitrust analysis 
	would handle this as a classic monopoly maintenance scenario.  
	At the same time, DACA's case-by-case approach preserves the 
	space companies need to develop new network facilities and 
	services and to enter into new business arrangements.
	In addition, DACA's interconnection authority would also 
	achieve a substantial amount of the same openness that network 
	neutrality proponents claim to be seeking.  In particular, net 
	neutrality would allow applications and content providers to 
	reach users of all interconnected carriers, so long as they 
	are able to reach a negotiated agreement with some carrier.  
	The necessity of one negotiated agreement is an important 
	check on regulatory opportunism, however.  It channels efforts 
	at entry into the marketplace and away from litigation at the 
	FCC.

	Conclusion

	Given that DACA has the analytic power and the regulatory 
	tools necessary to handle truly anticompetitive network 
	neutrality issues, institutional design becomes all important. 
	And the institutional design of the DACA framework and the way 
	that it would handle net neutrality issues comes back to its 
	fundamental premises.  One of DACA's fundamental premises is 
	that, given developing competition, an extensive web of ex 
	ante rules would have unintended consequences that would harm 
	consumers and likely stifle markets.  DACA is also premised on 
	the view that infrastructure providers will act, in general, 
	to promote applications and services that consumers want.  
	Consumers do not purchase bandwidth for its own sake; they 
	buy connections if those connections provide services and 
	applications that consumers want.
And so, if the evidence supports the requisite conditions - that the 
markets will be reasonably competitive, that the risks of truly 
anticompetitive actions are reasonably small, and that antitrust-based 
competition analysis is powerful enough to address it when it happens - 
then DACA is the right framework through which to address net 
neutrality.
 
	Mr. Upton.  Thank you, Joe.
	Mr. Makawa?
	Mr. Makawa.  Thank you, Mr. Chairman.
	I will get right to it.  I am CEO and Co-Founder of the Africa 
	Channel and I come before you with probably one of the most 
	compelling media projects of our generation.  The reason I say 
	that, I am one of those guys that was working in the garage 
	five years ago to try to get something like this off the 
	ground.  
	The Africa Channel is everything the political media and 
	consumer landscape in this country is ready to engage and to 
	experience.  I have got something to show you in 90 seconds.
	[Video]
	Chairman, the Africa Channel is here in the name of diversity.  
	America stands for diversity.  Our cable, telephone, and 
	satellite companies say they understand the importance of 
	diversity.  We embrace that position, support that position, 
	and pray that we are not getting hollow promises and lip 
	service.  The landscape has got to change.  Africa is about 
	diversity.  All our roots, collectively here take us back 
	there.  It is the cradle of mankind.  It is the most diverse 
	place on earth.  With that diversity comes a host of realities 
	like the celebration of life, conflict, tragedy, vibrant 
	cultures, adventure, wildlife, dance, music, history, food, 
	tranquility, all part of the African experience unmatched or 
	experienced anywhere else on the planet, something truly unique.  
	Double click on any one of these realities and you get some of 
	the most compelling stories and pictures to share with the rest 
	of the world.  In this case, the United States of America.  It 
	is this experience that as an independent network, we have been 
	able to capture the imagination of cable companies that have 
	committed to carry us, in this case COX and COMCAST.  We 
	applaud them for that, but they must do more.  And the 
	incumbent telcos must do more.  More markets, audiences that we 
	are reaching, are elated and so are the cable operators.
	So where are we with all the other carriers?  We are either 
	under discussion or negotiation depending on who you are 
	dealing with.  The process is either swift or moves at the 
	speed of molasses which is why we embrace competition.  
	Competition is good, it is healthy.  It means choice and access 
	for everyone.  That is the American way.  One or two 
	gatekeepers is unacceptable.  It is downright un-American.  New 
	technologies are opening up bandwidth, something that continues 
	to challenge the cable companies.  We just want a level playing 
	field.  We want the opportunity to compete on every platform.  
	Whether that be cable, telco, satellite, broadband, wireless, 
	and future platforms still to come.  We have enough fresh 
	quality content to fill all the digital pipes.  Case in point, 
	it does not matter whether the consumer is in Detroit, New York, 
	or Chicago, every consumer should have the opportunity to 
	access what we have to offer.  If the telcos are going to be in 
	Washington, D.C., why shouldn't all consumers of Washington, 
	D.C. have access to that platform?
	We have almost 1800 hours yet to be seen in this country, a 
	case where opportunity meets the right cause.  Let us not 
	forget the Africa Channel is not the problem, we are part of 
	the solution.  In demystifying Africa, people start to become 
	aware of how important Africa is to America's future, its 
	resources, energy, and ultimately security.  We are a catalyst 
	in ramping up trade and commerce.  Our channel brings forth 
	access for those with a hunger to learn, those with a hunger 
	for history, those with a hunger for business opportunities, 
	those with a hunger to simply connect and understand, those 
	who also want to be entertained.  We are here doing something 
	positive to that end.  We have done everything the MSOs and 
	the telcos have asked us.  Bring forth a quality product they 
	say.  Be relevant to the community.  Have a business model that 
	makes sense and make sure you can market your product and add 
	value to our business.  To all of the above, we can, we are, 
	and we will.
	I thank you.
	[The prepared statement of James Makawa follows:]

Prepared Statement of James Makawa, Co-Founder and Chief Executive 
Officer, The Africa Channel

I COME BEFORE YOU WITH ONE OF THE MOST COMPELLING MEDIA COMPANIES OF 
OUR GENERATION.
THE AFRICA CHANNEL IS EVERYTHING THE POLITICAL, MEDIA AND CONSUMER 
LANDSCAPE IN THIS COUNTRY IS READY TO ENGAGE AND EXPERIENCE.

(ROLL VIDEO TAPE: Running time 1:20secs.)

THE AFRICA CHANNEL IS HERE IN THE NAME OF DIVERSITY. 
AMERICA STANDS FOR DIVERSITY. BOTH CABLE, TELEPHONE AND SATELLITE 
COMPANIES   SAY THEY UNDERSTAND THE IMPORTANCE OF DIVERSITY. 
WE  EMBRACE THAT POSITION, SUPPORT THAT POSITION AND PRAY THEY WE 
ARE NOT GETTING HOLLOW PROMISES  OR LIP SERVICE. 
AFRICA IS ABOUT DIVERSITY. ALL OUR ROOTS TAKE US BACK THEREï¿½..IT IS 
THE MOST DIVERSE PLACE ON EARTH.
WITH THAT DIVERSITY COMES CELEBRATION,  CONFLICT,  TRAGEDY VIBRANCY 
IN THE NAME OF   CULTURE, ADVENTURE,  WILDLIFE, DANCE, MUSIC,  
HISTORY, FOOD, TRANQUILITYï¿½..ALL PART OF THE  
EXPERIENCE-UNMATCHED OR EXPERIENCED ANYWHERE ELSE ON THE PLANET.
DOUBLE -CLICK ON ANY ONE OF THESE CATEGORIES AND YOU GET SOME OF 
THE MOST COMPELLING STORIES AND PICTURES TO SHARE WITH THE REST OF 
THE WORLDï¿½..IN THIS CASE THE UNITED STATES OF AMERICA.
IT IS THIS EXPERIENCE THAT AS AN INDEPENDENT NETWORK WE HAVE BEEN 
ABLE TO CAPTURE THE IMAGINATION OF CABLE COMPANIES THAT HAVE 
COMMITTED TO CARRY US.  IN THIS CASE COX AND COMCAST. ALL THE OTHER 
PLAYERS ARE UNDER DISCUSSION OR NEGOTIATION. DEPENDING ON WHO YOU'RE 
DEALING WITH, THE PROCESS IS EITHER SWIFT OR MOVES AT THE SPEED OF 
MOLASSES.
WHICH IS WHY WE EMBRACE COMPETITIONï¿½ï¿½COMPETITION IS GOOD, ITS HEALTHY, 
IT MEANS CHOICE AND ACCESS.  THAT IS THE AMERICAN WAY.  ONE OR TWO 
GATEKEEPERS IS UNACCEPTABLEï¿½..IT IS DOWNRIGHT UNAMERICAN.
NEW TECHNOLOGIES ARE OPENING UP BANDWIDTH, SOMETHING THAT  CONTINUES 
TO CHALLENGE THE CABLE COMPANIES. WE JUST WANT A LEVEL PLAYING FIELD. 
WE WANT THE OPPORTUNITY TO COMPETE ON EVERYPLATFORMï¿½..WHETHER THAT BE 
CABLE, TELCO, SATELLITE OR BROADBAND.
IT DOES NOT MATTER WHETHER THE CONSUMER IS IN DETROIT, NEW YORK, 
WASHINGTON DC , LOS ANGELES  OR ST. LOUIS MISSOURI. EVERY CONSUMER 
SHOULD HAVE THE OPPORTUNITY TO ACCESS WHAT WE HAVE TO OFFERï¿½ï¿½IF THE 
TELCOS ARE GOING TO BE IN WASHINGTON DC WHY SHOULD'NT CONSUMERS IN 
ALL OF WASHINGTON DC HAVE ACCESS TO THEIR PLATFORM?    
WE HAVE ALMOST 1800 HOURS OF CONTENT YET TO BE SEEN IN THIS COUNTRYï¿½.
A CASE WHERE OPPORTUNITY MEETS THE RIGHT CAUSE.
LET US NOT FORGET, THE AFRICA CHANNEL IS NOT THE PROBLEM BUT PART OF 
THE SOLUTION WITH DIVERSITY.
IN DEMISTYFYING AFRICAï¿½.PEOPLE START TO BECOME AWARE OF HOW IMPORTANT 
AFRICA IS TO AMERICAS FUTUREï¿½.ITS RESOURCES, ENERGY AND SECURITY.  
OUR CHANNEL BRINGS FORTH ACCESS  FOR THOSE WITH A HUNGER TO LEARN, 
THOSE WITH A HUNGER FOR HISTORY, THOSE WITH A HUNGER 
FOR BUSINESS OPPORTUNITIES THOSE WITH A HUNGER TO SIMPLY CONNECT AND 
UNDERSTAND
WE ARE HERE DOING SOMETHING POSITIVE TO THAT END. WE HAVE DONE 
EVERYTHING THE MSO'S AND TELCOS HAVE ASKED OF US. BRING FORTH A 
QUALITY PRODUCT, BE RELEVANT TO THE COMMUNITY AND HAVE A BUSINESS 
MODEL THAT MAKES SENSE AND MAKE SURE YOU CAN MARKET YOUR PRODUCT AND 
ADD VALUE TO OUR BUSINESS.
TO ALL OF THE ABOVE, WE CANï¿½.WE AREï¿½ ANDï¿½. WE WILL. VISIT OUR WEBSITE 
AT WWW.THEAFRICACHANNEL.COM AND YOU SEE WHY WE ARE READY FOR BUSINESS 
AND WELCOME AN OPPORTUNITY TO PARTICIPATE ON A LEVEL PLAYING FIELD IN 
THIS DIGITAL AGE.
THANK YOU.

	Mr. Upton.  Well thank you very much.
	And I know Ms. Rodriguez you have got to take a conference 
	call shortly so you are watching the clock so--
	Ms. Rodriguez-Lopez.  Actually--
	Mr. Upton.  You did it already?
	Ms. Rodriguez-Lopez.  No.
	Mr. Upton.  I appreciate your testimony.
	A couple of question that I have, I do not know that I will 
	take my whole five minutes.  Ms. Johnson, as I listened to your 
	testimony, as I listened to Ms. Rodriguez-Lopez's testimony, 
	to a degree they were very much on the same page.  Now you are 
	talking about diversity and choice, and actually, Mr. Makawa 
	as well.  The need for rapid deployment, it is equally 
	important that we have competition availability.  Obviously, we 
	need to make sure that there are strong non-discrimination 
	policies and I will bet that Mr. Rush is going to want to talk 
	about that, so I will not steal his thunder.
	Ms. Johnson, the one thing that I did not hear you say in your 
	comments, as we look towards trying to see that competition, is 
	your comment specifically on the draft that we released earlier 
	this week.  Do you think that we, it is a good draft, that it 
	accomplishes the very things that you sought in your testimony?
	Ms. Johnson.  I think that it is an extraordinary start.  I 
	and my members are excited about the draft.  We believe that 
	it will open up markets, that it will allow for expeditious 
	investment.  Our members are negotiating as well with both 
	cable and telecommunications infrastructure providers and 
	believe that this will help initiate and jumpstart even more 
	opportunities for us to provide that diverse content.  As well 
	as we look at the issue of and I know there has been quite a 
	bit of discussion, while we do not consider ourselves experts 
	with respect to the build-out requirements, we do look at market 
	trends and do quite a bit of economic analysis.  Our livelihood 
	also depends upon those that take our service.  And as we look 
	at our minority communities, and I have heard lots of people 
	talk about the high valued customer and in that they sort of 
	assumed that that would not be minority communities, but as 
	all of the surveys and all of the research that we have seen 
	demonstrates that there is extraordinary buying power in those 
	communities and to the extent that there are, that the companies 
	are allowed to make the investment, that they too will be 
	investing in our communities.  So we are very encouraged by 
	what we have seen to date.
	Mr. Upton.  Great, thank you.
	Mr. Riddle, you may know that in an earlier hearing, I want to 
	say it was last summer, we heard testimony from many of the 
	same organizations that we heard today, that PEG channels were 
	ably represented by one of my constituents, who is in the room 
	actually sitting a little bit behind you, and met with him 
	recently back in Kalamazoo.  I advocated then at the hearing, 
	as I do now, that I support PEG channels.  I am interested in 
	your thoughts as we, as part of our draft, you know, we added 
	one percent on top of the five percent for gross to make sure 
	that PEG channels are adequately funded.  What is your sense, 
	in terms of that in essence the mandate that we put into that 
	as part of our bill with the addition on future years of 
	adding additional channels as well?
	Mr. Riddle.  I think overall it is the right move in the 
	right direction.  I think I am being instructed a little bit 
	by a question I got by Senator Stevens when we testified.  He 
	only asked one question, which was how many channels do you 
	want?  And, you know, I thought about it and, you know, 
	because he was proposing four.  And I thought about it and I 
	used to work in Manhattan and we had ten PEG channels more 
	or less and it was entirely uncomfortable because of the 
	large size of the population, and yet we have a lot of 
	communities where two or three might be entirely adequate.  
	So it occurred to us that we ought to set up a scale.  Of 
	course the numbers we are not discussing, but a scale both 
	for funding and for channel capacity which would eliminate 
	the need for people to be able to have to go in and negotiate 
	what is the specific community need that we would tie these 
	to, you know, the size of the community or the size of the 
	gross and that we would really make the commitment to try to 
	stick around those kind of median, those sorts of numbers 
	that you had discussed before either the one percent or in 
	his case the four channels so that we are hovering around 
	those numbers.
	Mr. Upton.  So as my time expires, you are pretty happy with 
	that one percent that we added in the bill, and it was 
	probably, if I could put words in your mouth, a surprise 
	perhaps, pleasant surprise.
	Mr. Riddle.  Because of what we had heard might have been 
	happening, we were happy with that as it was.  We would 
	like to make some adjustments just to help the rural 
	communities and the small towns so that if you are talking 
	about one percent in a very small town, it might be hard 
	to pay the rent with that, so you are talking about a small 
	amount of money if you increase the percentage there but we 
	think with the larger cities, they will kill me for this, 
	but the one percent may get them close to being where a lot 
	of their agreements are.
	Mr. Upton.  Thank you.
	Mr. Markey?  He is only moving because this mic does not 
	work.
	Mr. Markey.  Thank you, Mr. Chairman.
	Ms. Johnson, welcome back.
	Ms. Johnson.  Thank you.
	Mr. Markey.  In a March 9 Technology Daily story you are 
	quoted as saying that your group opposes a build-out 
	requirement, but you said that your group's opposition on 
	that would change if there is evidence of segments of the 
	minority community seeking service but being denied it 
	within a reasonable period of time.  What is a reasonable 
	period of time in your opinion for the Bells to serve the 
	minority community in a city that they are deploying this 
	new technology?
	Ms. Johnson.  Sir, it would be, and I am not punting, but 
	I guess I do not know what a reasonable amount of time 
	would be in terms of an absolute number.
	Mr. Markey.  Yes.  Would 20 years be too long?
	Ms. Johnson.  Would 20 years be too long to build-out to-- 
	Mr. Markey.  To build-out to the minority community.
	Ms. Johnson.  I would think that 20 years would be too 
	long.
	Mr. Markey.  Is ten years too long?
	Ms. Johnson.  I would think that where we should focus is on 
	where the market would take us.  I think that--
	Mr. Markey.  I know, but what I am saying is if the market 
	does not go there and they just decide not to go there, is 
	ten years too long for them to still build-out in the minority 
	community?  The cable companies have built out the entirety of 
	the cable community.  Do you think ten years is too long for 
	the Bells to have to build-out?
	Ms. Johnson.  I do not think that there should be a number 
	attached to the build-out requirement.
	Mr. Markey.  But you say a reasonable period of time.  What 
	is reasonable?
	Ms. Johnson.  I think that reasonable will be dictated by 
	the circumstances.
	Mr. Markey.  So you do not think we should actually be 
	talking about any specific time frames then in the bill?
	Ms. Johnson.  You know at first blush as I have watched the 
	build-outs that have occurred in the areas where they have 
	penetrated the market, they appear to have a very diverse 
	build-out in terms of minority communities, in terms of 
	full communities.  So the process seems to be working.
	Mr. Markey.  Okay.  So should the local community have an 
	ability to determine what is reasonable?
	Ms. Johnson.  I think that the process has been outlined 
	to date is a good start and that has a Federal process in 
	place.
	Mr. Markey.  A Federal process.  Is your organization 
	financially supported by the Bell companies in any way?
	Ms. Johnson.  No we are not.
	Mr. Markey.  At all?
	Ms. Johnson.  Yes, and let me elaborate upon that, too.  We 
	are a relatively new organization.
	Mr. Markey.  No, that is okay, I can go along with that 
	answer.  That is fine, thank you.  And are you compensated 
	in any way by the Bell companies?
	Ms. Johnson.  I have a consulting firm that works for a 
	variety of companies generally in the regulatory space we 
	had--
	Mr. Markey.  But are the Bell companies amongst those 
	companies that--
	Ms. Johnson.  Yes.
	Mr. Markey.  --that pay you.  Okay, thank you. 
	Let me ask you, Ms. Rodriguez-Lopez.  You said that only one 
	in eight Hispanic families have access.
	Ms. Rodriguez-Lopez.  Correct.
	Mr. Markey.  So there has been plenty of opportunity here for 
	the companies to reach the minority, the Hispanic community 
	but they have not done so.  Do you think that we should put 
	in a time limit in terms of the company's responsibilities to 
	reach the Hispanic community?
	Ms. Rodriguez-Lopez.  I have a little bit of a different take 
	on that and my specific answer would be, I am really looking 
	for equity in the deployment from day one.
	Mr. Markey.  Right, I am with you.
	Ms. Rodriguez-Lopez.  Which is a little different.  People 
	are saying, well, I believe that they are going to reach the 
	diverse markets.  I just believe that we need to look at the 
	markets--Hispanic, African American, low-income, urban, 
	minority communities--and from day one say we are going into 
	those communities because we could never reach every community 
	as they deploy.
	Mr. Markey.  Do you think that should be in the bill that they 
	have that requirement or just leave it to the company to 
	decide?
	Ms. Rodriguez-Lopez.  No, I would leave that to the great 
	minds that are on that side.
	Mr. Markey.  Thank you so much.
	Ms. Rodriguez-Lopez.  If it is possible to build that in as 
	a principle then I would hope, but that has been what I have 
	been articulating.
	Mr. Markey.  I thank you.  Well great minds are not thinking 
	alike at this point in time.  We are hoping we can get them 
	all to agree on that.  And this is--
	Ms. Rodriguez-Lopez.  They are not thinking alike here 
	either.
	Mr. Markey.  Yeah.
	Mr. Makawa, you say in your testimony, you say if the telcos 
	are going to be in Washington, D.C., why should not all 
	consumers and all of Washington, D.C. have access to their 
	platform.  So do you support a requirement that would be built 
	in the bill that the Bells would have to serve all parts of 
	Washington, D.C.?
	Mr. Makawa.  Absolutely.
	Mr. Markey.  And would you support a provision here that 
	required build-out to all parts of the community?
	Mr. Makawa.  Absolutely.
	Mr. Markey.  Excellent.  
	And Ms. Kenney, on the first panel I asked the head of the 
	cable industry association, Mr. McSlarrow, whether he could 
	pledge when cable operators get national franchises and have 
	no local service obligations that incumbent cable operators 
	have.  One, would that they would not withdraw service from 
	certain areas, two, would not fail to upgrade service and 
	technology uniformly, three, would not raise rates on consumers 
	in the part of town that did not have deployment by the Bell 
	company in order to lower prices for those lucky enough to be 
	on the good side of town, the wealthier part of town where the 
	Bell company has chosen to serve.  He would not pledge to any 
	of those three items.  So in the absence of a build-out 
	requirement ensuring service area parity so all consumers get 
	the benefits and all providers compete across the franchise 
	area isn't there great risk of harm to consumers there?
	Ms. Kenney.  Oh, absolutely Congressman Markey.  I mean that 
	is probably what is most concerning in this bill, the 
	opportunity to look at video franchising and provide new 
	competition to consumers is really exciting, but that 
	competition has to come to everyone for people to truly 
	benefit from it.  And if it does not, then you have to at a 
	minimum make sure that those consumers who are getting that 
	competitive service are not harmed, and under this bill and 
	based on Mr. McSlarrow's comments, it certainly seems like 
	they would be.
	Mr. Markey.  Okay, I thank you.
	I thank you, Mr. Chairman.
	Mr. Upton.  Mr. Barton.
	Chairman Barton.  Thank you, Mr. Chairman and I want to thank 
	this panel for being so patient and waiting half a day to 
	testify to five congressmen.  But you have got five quality 
	congressman and women here.  I am telling you, you have got 
	four of us that have been negotiating the bill for over a 
	year and a half and Mrs. Blackburn is the author of a similar 
	bill down in Tennessee and has been very involved in the 
	negotiations in following them and has introduced her own bill 
	along with, I think Mr. Inslee, so while you do not have a 
	full subcommittee here, the people that are still here are 
	very interested in what you have got to say.
	Mr. May, your group is kind of a think tank I think.  Would 
	that be an adequate characterization?
	Mr. May.  We are, exactly.
	Chairman Barton.  Mr. Markey's premise in our negotiations was 
	that these new entrants in the video services, almost by 
	definition, were not going to try to serve the minority 
	community for some reason and we went round and round with him 
	on build-out requirements and uniform pricing requirements 
	and things of this, in very honest, open dialogue.  On the 
	other hand, Mr. Rush who has a congressional district that 
	probably is a majority minority district, I do not know that 
	for a fact, but my guess is it probably is and has looked at 
	the same set of circumstances and feels like, that at least 
	the minority community that he represents is going to be well 
	served by a national franchise with no build-out requirement 
	or things like this.  
From just a think tank economic perspective, what is your version of 
the reality with the Verizons and the AT&Ts and these new entrants, 
do you think they are going to go in and just serve white effluent 
America or do you think they are going to look at wherever if there 
is a large demand for these type of services, regardless of ethnicity 
or whatever, they are going to serve where they can feel like they 
get the biggest take rate from the beginning?
	Mr. May.  It is going to be exactly the latter of course, 
	Mr. Chairman.  I mean one thing I am sure of is that they 
	have no interest in this competitive environment that we are 
	now in.  Basically I think while you were out of the room 
	or--and in my written testimony, the video marketplace is 
	already, you know, somewhat competitive or quite competitive.  
	And this national franchise, which I think is a very positive 
	step, will make it even more competitive than it already is 
	at this time.  And the basic fact is that none of these 
	companies are going to make any judgment based on race, 
	ethnicity, or anything like that.  They are fighting for 
	market share and they are going to go where the market is 
	and they have incentives to do that.  The danger is really in 
	trying to regulate in that type of environment and dictate to 
	them, you know, where to go first, exactly how quickly, and 
	under what timetables you have to get there and assume that 
	as smart as you are and even with the right Congress people 
	in this room right now, that you are going to be able to know 
	how to do that better than the marketplace, which will drive 
	these companies in exactly the direction that you suggest.
	Chairman Barton.  What is your view, Mr. May, of the number 
	of new entrants that would tend to come into a market if you 
	have an incumbent cable provider that is already there and 
	you have a satellite provider that is already there.  Do you, 
	would the incumbent telephone company, who I tend to think 
	might be the first new entrant, would a wireless entrant also 
	tend to come in rather early or do you think the wireless 
	guys are going to wait to see how the phone companies fair in 
	this competition?
	Mr. May.  I think in some of these markets that there will be 
	room for the wireless guys to come in as well, and they might 
	do that.  You know, I think that it is just the, I think it is 
	very positive to establish the national franchise and move 
	away from the local franchises, which really were originally 
	a way of getting what was thought to be a monopoly problem.  
	Now it is obviously true that the cities need to manage their 
	rights-of-way and you take care of that, well you can take 
	care of it, but the franchises were really an economic 
	regulatory device.  We are in a situation now where with the 
	competitors that exist and with the technology being as 
	dynamic as it is to include wireless.  I mentioned again in 
	my earlier statement that, you know there are people, 
	including my daughter for one, who watches television over 
	her cell phone now.  I mean there are people that are doing 
	that.  That is video competition.  It is not perfectly 
	substitutable.  But the thing that I think you do not want 
	to do is to dictate and try and define in advance what the 
	parameters of that competition should be.
	Chairman Barton.  Okay.  I just have one final question 
	Ms. Johnson.  Tell me a little bit about what the Video 
	Access Alliance is.
	Ms. Johnson.  The Video Access Alliance is made up of 
	independent networks, TV channels that are providing 
	programming very similar to the Africa Channel of independent 
	networks not affiliated with any of the providers.  And our 
	group serves as an advisory group, as well as, an advocacy 
	group for their interests.  We are extraordinarily interested 
	in this process of video franchise reform because we see 
	multiple platforms as a means for us to achieve greater 
	carriage.
	Chairman Barton.  So your group is primarily interested in 
	providing support to get your channels carried by these as you 
	call them platforms.
	Ms. Johnson.  Absolutely.
	Chairman Barton.  So it is not really a mouthpiece for the Bell 
	companies or anything like that?
	Ms. Johnson.  Absolutely not.  We are interested in providing 
	quality programming and we believe that if we are allowed to 
	provide that quality programming that all consumers will benefit 
	by lower rates, as well as having a diverse group of voices to 
	be heard.
	Chairman Barton.  Okay, thank you.
	Ms. Johnson.  Thank you.
	Mr. Upton.  Mr. Rush?
	Mr. Rush.  Thank you, Mr. Chairman.
	Ms. Johnson in, to be in addition to the Chairman's comments, I 
	want to just ask you because I have a little concern that we do 
	not send wrong messages here.
	Ms. Johnson.  Sure.
	Mr. Rush.  There are most members of this committee and members 
	of this body who accept contributions from all kinds of people, 
	including the telephone companies, the Bells and almost every 
	other industry that comes before this committee including the 
	industries that have a legitimate interest in the discussions.  
	And most take the positions that although we might accept 
	campaign contributions from them, there is no way that those 
	contributions dictate or influence our positions here.  So my 
	question to you is have you, are you here at the behest of any 
	of the providers, any of your contractors or your ones that you 
	consult with or are you at the behest of an independent 
	organization representing their interests?
	Ms. Johnson.  Yes, sir, I am here at the request and honorably 
	here at the request of my members.  My members are independent 
	networks made up a diverse collection of entrepreneurs who are 
	providing diverse rich content that adds value for all 
	consumers.
	Mr. Rush.  And so any implications that you might be a 
	spokesperson or a mouthpiece for any stakeholder in these 
	discussions other than your independent providers would be 
	absolutely incorrect.  Is that--
	Ms. Johnson.  Yes, sir, absolutely incorrect.
	Mr. Rush.  Okay.  Let me just lead to the next question that 
	I have.  In your statement, now this is Ms. Kenney's statement, 
	I am sorry, we will move onto Ms. Kenney very quickly.  
	Ms. Kenney, in your statement and you talked about the anti-
	redline prohibitions, that the burden of proof should be placed 
	on the cable providers.  Do you think that this will strengthen 
	the anti-redlining provisions of this bill if the--and what do 
	you mean by that?
	Ms. Kenney.  Well, first of all, we do not believe that anti-
	redlining provisions on their own are sufficient to actually 
	prevent redlining.  You know, cable has the act, currently has 
	an anti-redlining provision in it as well.  We have not seen 
	redlining in cable to date because communities have had the 
	ability to require build-out albeit over too slow of a time 
	period, but redlining provisions in the absence of build-out 
	we do not believe are effective.  
Secondly, we would rather not see that redlining occur in the first 
place.  We would rather not have to litigate for consumers to get 
access to competitive services.  So flipping the presumption of proof, 
requiring a provider to demonstrate that they are not providing 
service in an area for reasons other than the income of that particular 
area would certainly make it easier for a community to demonstrate 
that redlining was or was not occurring.  Otherwise, the community has 
to prove that income is the reason.  There are lots of excuses we 
believe that providers can and have made in the past for why they have 
not provided a service in a particular area.
	Mr. Rush.  Mr. Makawa, would you give us some brief synopsis 
	of your experiences in terms of how difficult it was for you to 
	get the Africa Channel, get that on any kind of channel at all 
	and service to provide it.
	Mr. Makawa.  It is probably the most arduous journey I have 
	ever been on to be perfectly honest and perfectly blunt.  But 
	nonetheless, independent channels trying to get on today, there 
	is probably a handful of us and part of the reason I am for 
	this specific direction that this body is taking is with all 
	due respect to the cable companies when you walk into them, some 
	of them have been very friendly but the first thing out of 
	somebody's mouth when they say hello to you is we do not have 
	any bandwidth.  That is the first thing that is said.  Now with 
	all the technological geniuses that exist in this country, how 
	is it that the toilet pipes are going to clog up?  I do not 
	understand it.  So all of these folks have said, you know, 
	one thing Congressman that people are not unpacking here, it 
	is not just the cable companies, it is not just the telcos, 
	it has got to do with the price of content.  The price of 
	content has gone through the roof.  And those are issues that 
	have to be addressed.  Now, I am perfectly comfortable coming 
	before this body and saying to you that we did not take 
	$100 million to launch this network, we launched this network 
	for less than $8 million bucks.  Those pictures you saw there, 
	we did not spend $100 million on that.  And when we walked into 
	every cable company, we walk in and they say Africa, they go 
	oh, it is going to be grainy, there is no value, and then all 
	of a sudden the attitude changes.  But we have had to walk in 
	with a business proposal, number one, with content with high 
	quality at a low price, and we have had to deliver things 
	that other people have not even had to think about.  The 
	playing field is not level, it has got to change.
	Mr. Rush.  Okay, yeah.
	Ms. Johnson, I have sat here all day and I have heard about 
	these high performing clientele of this group that is the 
	high preference group and the low preference group and I just 
	wondered can you, I mean I kind of instinctively, you know, 
	react to that because I know that in every instance in my 
	community, where I live and where I work and what I represent, 
	every time there is a new technology, the people I represent 
	to my amazement become the greatest, they have the greatest 
	market share of that technology.  I remember when the cell 
	technology for wireless phones first came.  You know, all of 
	a sudden they discovered that and the so-called low performing 
	communities that there was a significant market, a great 
	market, and I think that competitively speaking that that 
	community has more cell telephones than any other community 
	now.  The same thing with cable, you know, the poor people, 
	the African Americans, minority communities, they have the 
	greatest market share in terms of cable television.  Do you 
	see any difference between what this bill offers and what has 
	been the past experience and how do you react again to this 
	distinction that folks have about minorities being low 
	preference or low performing or have some kind of a low 
	interest.  How do you react to that kind of--
	Ms. Johnson.  I react in a similar manner to which you have 
	reacted and most of that reaction is based on real life 
	experience, Sunday afternoon at my mamma's house understanding 
	that the services that they use and that they value.  And I 
	understand that they are the high value customer and I 
	understand the power that that brings.  One of my concerns 
	with respect to onerous build-out requirements is that, my 
	first concern is what will that do to, or will that stifle 
	the investment being made because, see, these people do not 
	have a choice as to whether or not to invest that money.  
	And then secondarily, let us assume that it doesn't stop at 
	investment.  What would that do to the cost of service?  I 
	submit to you that that would increase the cost of service 
	to even these high-value customers.  Specifically to your 
	question, many studies have shown, and if you will allow me, 
	I will give a few stats, particularly with respect to the 
	minority communities.  Minorities have higher penetration 
	rates for digital TV, premium channels, and are the best pay 
	per view customers.  Minorities are the top subscribers to 
	premium channels including HBO and Showtime.  Seventy-four 
	percent of black urban cable users, 63 percent of Asians are 
	users, and 61 percent Hispanic subscribe to more than one 
	extra fee service, compared to 43 percent white.  Blacks spend 
	59 percent on cable satellite, 20 percent more than whites.  
	Blacks spend $27 on premium channels, 23 percent more than 
	whites.  I submit to you that if you are looking at the 
	high-value customers that are looking for these services, that 
	will receive these services, this is the community that will 
	have the biggest benefit.  And if you overlay that with new 
	content--the gentleman with the Africa Channel talked about 
	his offering--if you overlay the content competition which 
	will help decrease the price of content and couple that with 
	where the market will take you, I submit to you that all 
	consumers will benefit but particularly African Americans.
	Mr. Rush.  In summation, you know, there is a real simple 
	reason for it.  The cable, these channels, they are the ones 
	that offer programs that have, in their content, they have 
	African Americans so they have more African American family 
	shows, more African American music, and that is why your 
	channel, the Africa Channel is going to really be quite a 
	success if we can get it more broadly seen because of the 
	fact that there is just a demand for more programs that feature 
	African Americans.  That is the reason why cable is such a 
	success in African American communities, exactly the reason.
	Mr. Upton.  Thank you.
	Mrs. Blackburn.
	Mrs. Blackburn.  I know you all are all so glad to see me come 
	around.  That means I am the last one.  
	Ms. Johnson, I appreciate so much what you have had to say.  I 
	represent a little bit of Memphis, a little bit of Nashville in 
	my district and have worked for many years with some of our 
	content producers down there and also our content providers and 
	do recognize the distinction and appreciate the distinction 
	between the two of those.  I actually have spent some time 
	working on this issue as a small business issue.  Mr. Makawa, as 
	you were saying, it is entrepreneurs that have a dream.  They 
	want to get in there, they want to produce their product, they 
	want to find an outlet for that product, they want access to the 
	marketplace, they want access to consumers so that they can build 
	a constituency for their programming.  And it takes a lot of hard 
	work.  It takes a lot of time.  And when I do a town hall meeting 
	in my district with all of these songwriters and producers and 
	content great thinkers, as I like to say, or great creative 
	community, one of the things I hear from them regularly is when in 
	the world are you all going to put the pencil to the paper and free 
	up this marketplace and start deregulating this thing and free up 
	some of this bandwidth and open up these pipes and let us have 
	more access to the marketplace.  That is what we hear from them 
	regularly.
	So my question is I want to be sure I understand you all on this.  
	Ms. Johnson, you all do not favor a build-out requirement.  Is 
        that correct?
	Ms. Johnson.  That is correct.
	Mrs. Blackburn.  Okay.  Mr. Makawa, I was confused, I thought, I 
	could not, I did not realize what you said.  Do you favor 
	build-out or do you not favor build-out requirements?
	Mr. Makawa.  Yes, Ms. Blackburn, I do favor it.  Here is the 
	thing.
	Mrs. Blackburn.  Okay.  
	Mr. Makawa.  This is not--
	Mrs. Blackburn.  No, I just need a yes or no from you, we are 
	quick on time.  
	Okay, Ms. Kenney, you favor build-out?
	Ms. Kenney.  Yes.
	Mrs. Blackburn.  Okay, all right.  That is--and Mr. Riddle?
	Mr. Riddle.  I think that is one remedy.  I do favor correcting 
	market--
	Mrs. Blackburn.  You favor build-out, okay.  You see that--
	Mr. Riddle.  Well perhaps.
	Mrs. Blackburn.  Perhaps?
	Mr. Riddle.  Yes.
	Mrs. Blackburn.  Mr. May?
	Mr. May.  No.
	Mrs. Blackburn.  You do not favor build-out, okay.  See, when 
	you talk about freeing up the marketplace and you talk about 
	opening up and having access, I get a little bit confused when 
	you say you favor build-out.  Now Mr. Makawa go ahead and finish 
	what you were going to say very fast, 30 seconds.
	Mr. Makawa.  Thirty seconds.  If these people are not going to 
	build-out, but we know that we have got community to spend in 
	excess of $700 billion a year and they are going to go into 
	Brentwood instead of going into Compton, then we are going to 
	have issues.
	Mrs. Blackburn.  Okay, all righty.  You know, I do not see how 
	you can be on both sides of that argument but if it is your 
	opinion, it is your opinion.
	Very quickly some of you have mentioned net neutrality.  I will 
	tell you what I want to do with that and just have you respond 
	to me in writing.  When we look at Section 201 and then you go 
	in and we have a study in here Point C is a study.  I would like 
	to hear from each of you how you would define that neutrality and 
	how you would address that issue.  If you conducted this study on 
	behalf of your members, on behalf of the groups that you work 
	with, then what would you want us to know?  How would you write 
	that provision?  How would you have the FCC address that?
	And Mr. May, I am going to come to you with my last question.  
	I am down to 58 seconds.  The DACA project, I have read some on 
	that.  I appreciate the work that you all have done on this 
	project and I agree completely with two of the premises that 
	you mentioned, that the markets are increasingly competitive, 
	and with the technological developments that service based 
	regulatory categories that we have got to look at one kind of 
	regulation for Telcom and other for information and another for 
	cable.  And I would like for you just to talk a little bit for, 
	we have got 19 seconds so it might not even be possible about 
	how you would approach that division in regulation on services, 
	not on technology, but on services.
	Mr. May.  Well, thank you, Congresswoman.  It is really 
	important to replace the service definitions including cable 
	operator, that kept coming up this morning and all the others 
	which are based on what I have called the techno functional 
	constructs.  They are all linked to technical characteristics 
	and functional capabilities.  Just replace all of those with a 
	provision or the heart of the new act should be typing 
	regulatory activity to a competition standard so that the 
	regulator is judging whether to intervene based upon where 
	there is a potential for anti-competitive abuse.  We have 
	suggested as you know in our DACA project, a standard that 
	does that.  It is an anti-trust like standard.  It is not 
	totally coincident with the anti-trust laws.  But in that way 
	when there is an allegation of abuse, say a net neutrality-
	like allegation, then the FCC would look at the particular 
	circumstances of the allegation, it would look at the market 
	power, the market structure, the potential entry, the 
	technological dynamism, and it would make a decision on that 
	case and it could impose a remedy that would be very 
	particular.  It is very important in this environment we are 
	in now, where the technology is changing so quickly, the 
	marketplace is changing, to establish a regime in which the 
	regulation takes place--
	Mrs. Blackburn.  Mr. May if I can cut you off right there.  
	Let me just--but what you are--also this would be a more 
	flexible structure to work from and--
	Mr. May.  It would be absolutely more flexible and it would 
	not--
	Mrs. Blackburn.  --would allow for new and emerging 
	technologies and delivery systems.
	Mr. May.  Exactly.  You would not anticipate in advance all 
	of the potential harms which may then well cut off the new 
	technologies, the new services because you have anticipated 
	too broadly without understanding what developments may take 
	place.  So it is more flexible.  It is more targeted, but it 
	also allows you to remedy true marketplace abuses.
	Mrs. Blackburn.  Abuse problems.  Thank you, sir, I 
	appreciate that.
	Mr. Chairman, thank you.
	Mr. Upton.  Mr. Markey wants me to ask, as we conclude this 
	hearing, if you had one thing you wanted us to remember from 
	your testimony today that we should think about as we mark-up 
	next week, if you could try to sum it up in 30 seconds each.  
	We will start at this end since you were gone from the room, 
	but Mr. Makawa we will go right down the line and then we will 
	finish up the hearing.  Mr. Makawa, one thing for us to 
	remember next week.
	Mr. Makawa.  Do not try to regulate the Internet.  It is the 
	biggest aggregator and that is the one leveling playing field 
	that is going to gravitate from where we are currently.  There 
	are developments that are happening with the telcos and the 
	cable companies, that needs to play itself out but until some 
	of these companies can behave like good little boys and good 
	little girls, somebody needs to be the watch dog.
	Mr. Upton.  Mr. May?
	Mr. May.  In 1980, I was Associate General Counsel at the 
	Federal Communications Commission and I remember at that time 
	when Congress was beginning to look at telecommunications 
	reform of the existing 1934 Act, sitting in Mr. Markey's 
	office for one long evening talking about how we need a new 
	act, how the world was beginning to change at that time.  It 
	was a wonderful conversation.  So the thing that I would want 
	all of you to remember is that fortunately due to technological 
	change we are in a very much different environment than we were 
	when Mr. Markey and I had that conversation back in 1980 here 
	in 2005.  Thank you very much.
	Mr. Upton.  Ms. Kenney?
	Ms. Kenney.  I would urge the committee to consider that as 
	you look at a national franchising model, you are giving a lot 
	of local control up and a lot of consumer protection up in the 
	form of customer service standards and local enforcement and 
	build-out requirements.  And so as you move to a national 
	franchise, which we do not object to, you have got to figure 
	out how to maintain those protections at the national level 
	to ensure that if competition comes, it comes to everyone.
	Mr. Upton.  Mr. Riddle?
	Mr. Riddle.  Local design and control, standardize PEG funding, 
	standardized PEG channel capacity, Federal minimum supersedes
	State law and protect this agreement against the migration of 
	services to an IP or other technically different system.
	Mr. Upton.  Ms. Johnson?
	Ms. Johnson.  That consumers will benefit from multiple 
	platforms by way of diverse content, lower prices, more choice, 
	and to couple with that an understanding and respect for the 
	fact that minorities are high value customers.
	Mr. Upton.  Thank you.  Ms. Rodriguez-Lopez?
	Ms. Rodriguez-Lopez.  Thank you so much again, Mr. Chairman.  
	You are a very patient man.  I appreciate you giving me the 
	time to go out.
	I am going to draw an analogy.  When I was asked how I felt 
	about abortion rights and the constitutional right, I said 
	there are protections that exist in the constitution, the 
	right to bear arms because reasonable people call on certain 
	things when they require them.  This bill must contain the 
	anti-discrimination provisions.  It must contain those 
	protections.  If we believed that every one would always do 
	the right thing at the right time, we would not have laws in 
	place to govern.  And so in an ideal world, everyone will be 
	deployed equally and benefit from competition, but we also 
	know that we have a history of not always doing the right 
	thing.  So thank you so much for this opportunity.
	Mr. Upton.  Well again, I want to thank all of you for being 
	patient with us since we started seven hours ago and 
	appreciate your testimony.  I told my friend, Mr. Markey, 
	that we intend to have opening statements next week on 
	Tuesday at 5:00.  We will do opening statements as long as 
	it takes.  I know it is 6:30, so there is a doorstop there 
	and we will resume with the markup then on Wednesday, at 
	10:00 a.m., and hopefully be finished on Wednesday, but if 
	we have to carry over to Thursday we will.  So with that, 
	again I appreciate everyone's testimony and we are now 
	adjourned.
	[Whereupon, at 4:55 p.m., the subcommittee was adjourned.]

Submission for the Record by Bob Freudentha, President, American 
Public Works Association

Mr. Chairman and members of the committee, thank you for the 
opportunity to submit this testimony for the hearing titled 
Communications Promotion and Enhancement.  My name is Bob Freudenthal, 
President of the American Public Works Association (APWA), and Deputy 
General Manager of the Hendersonville Utility District in 
Hendersonville, TN.  I submit this statement today on behalf of the 
27,000 public works officials who are members of APWA, including our 
nearly 2,000 public agency members.  We appreciate the opportunity to 
submit a statement with regard to this new legislation. 
APWA is an organization dedicated to providing public works 
infrastructure and services to millions of people in rural and urban 
communities, both small and large.  Working in the public interest, 
APWA members design, build, operate and maintain transportation and 
rights-of-way; natural gas, electricity and steam distribution 
facilities; water supply, sewage, and refuse disposal systems; public 
buildings and other structures and facilities essential to our 
nation's economy and way of life.   
I appreciate the opportunity to address the important role local 
governments and public works departments play in managing local public 
rights-of-way and how local franchising supports that role.  APWA has 
been and will continue to be an advocate for the development of 
policies which ensure the safe and efficient management of public 
rights-of-way.  We urge your support for two important principles 
relating to local governments and rights-of-way management when 
advancing legislation to rewrite the nation's communications laws and 
policies.  
The first is that local government officials have a fiduciary 
responsibility on behalf of the citizens we serve to manage public 
property, including the public rights-of-way, a public asset with an 
estimated value of more than $7 trillion.  Respect for local control 
and local governments' long-standing authority to manage rights-of-way 
is necessary to ensure their safe and efficient operation.  It is 
vital that local governments and other public agencies retain their 
authority to fulfill their statutory obligations and duties related to 
managing public rights-of-way.   
This authority includes the ability to establish permit, location, 
inspection and pavement restoration controls and rights-of-way 
restoration; to encourage cooperation among and develop scheduling and 
coordination mechanisms for all rights-of-way users; to obtain and 
maintain accurate information for locating existing and new facilities 
in the public rights-of-way; to hold responsible parties accountable 
for the restoration of the public rights-of-way; and to charge and 
receive compensation for the use of the public rights-of-way.  
The second principle is that local governments support competition in 
communications services and technology.  We embrace innovations that 
make possible competition in video, telephone and broadband services.  
Moreover, we support deployment of these technologies as rapidly as 
possible.  However, as new communications technologies and services 
enter the marketplace, local governments must be kept whole and our 
authority to manage public rights-of-way preserved. 
We share the concerns of our local government partners regarding the 
impact of the legislation on managing rights-of-way.  Without a 
franchise agreement, the only effective mechanisms that local 
government has to manage its public rights-of-way, ensure competition 
for everyone and collect franchise fees are eliminated.  Another 
concern is that, although the legislation preserves local authority 
over the management of rights-of-way, it does not provide sufficient 
enforcement authority to assure compliance.  In addition, while the 
legislation is silent on the appropriate forum for resolving local 
rights-of-way disputes, by default that task would move to the 
Federal Communications Commission.  
Preserving full local franchising authority is critically important 
to rights-of-way management.   Franchises do not just provide 
permission to offer video services; they are the core tool local 
governments use to manage streets and sidewalks, provide for public 
safety and emergency response capability, enhance competition and 
collect compensation for private use of public land.  Eliminating or 
limiting local franchises will cause chaos, undermine safety and 
deprive local government of the power to perform its basic functions.  
Public agencies have the responsibility to keep public rights-of-way 
in a state of good repair and free of unnecessary encumbrances.  The 
public expects local governments to ensure that the deployment of new 
services does not result in potholes, traffic backups and congestion, 
damaged sidewalks, ruptured water or gas lines, disrupted electrical 
power or diminished community aesthetics, particularly with respect 
to managing above ground versus below ground installations.    
The right to obtain and use land for public benefit is a long-standing 
tradition and is provided for by law. For more than a century, the 
concept of accommodating both public and privately owned utilities in 
the public rights-of-way has been recognized to be in the public 
interest.  Public rights-of-way are normally acquired and developed 
by public agencies for transportation routes, water supply, waste 
disposal, power distribution, means of communications and similar 
services. Such services are provided for the common good of the public, 
and are generally authorized and directed by public agencies, which 
have an obligation to regulate and manage the use of public rights-of-way 
in the interest of the convenience, health, safety and welfare of the 
public.  
It is our duty and responsibility as public agencies and that of elected 
officials to be good stewards of the public rights-of-way and to adopt 
reasonable ordinances that allow public officials to: manage the public 
rights-of-way on behalf of their citizens to ensure public health, safety 
and convenience; manage the surface of the public rights-of-way to ensure 
structural integrity, availability, safety and a smooth street surface 
for the traveling public; manage the space below the surface of the 
public rights-of-way to ensure safe and economical access for all 
current and future users of the rights-of-way;  and manage the space 
above the surface of the public rights-of-way, including the placement 
of overhead utility facilities, to ensure efficient use of space and to 
minimize safety hazards and impact on community aesthetics.
As the pace of implementing new communications technologies accelerates, 
the number of damages incurred by owners of both private and public 
utilities is sure to grow, if local governments are not allowed to 
manage their rights-of-way.  Managing public rights-of-way is complex, 
and decisions regarding management and control of local public 
rights-of-way belong to local governments.   Each utility provider 
installs a separate system in its own unique location within the public 
rights-of-way. The systems are often installed on existing pole lines, 
in narrow trenches or in conduits that are bored into place.  There 
is a correlation between the number of excavations and corresponding 
damage, and repeatedly cutting and repairing streets can permanently 
damage street pavement structures.  Moreover, in the absence of 
compensation from utilities, taxpayers bear the burden of significantly 
increased street maintenance costs.  
APWA has a Utility and Public Rights-of Way Technical Committee whose 
members provide education and information to raise awareness and 
promote the best use of the public rights-of-way for the public good. 
Our committee provides a forum where stakeholders can come together 
to discuss common issues and best management practices that will 
promote the effective integration of all users and stakeholders 
within the public rights-of-way.  
In conclusion, APWA supports competition and the rapid deployment 
of communications technologies and services in the communities we 
serve.  We support a balanced approach that encourages innovation 
and preserves local governments' long-standing authority to manage 
public rights-of-way and to receive fair and reasonable compensation 
for their use.  Franchising authority is a core tool local governments 
use to manage rights-of-way in the public interest in order to protect 
public safety and public infrastructure.   
Mr. Chairman, we are especially grateful to you and Committee members 
for the opportunity to submit this statement.  APWA and our members 
stand ready to assist you and the Committee in any way we can.  

Contact:		Jim Fahey 
Director of Government Affairs 
American Public Works Association 
202-218-6730
[email protected]




Response for the Record by Walter McCormick, President and Chief 
Executive Officer, United States Telecom Association

The Honorable Barbara Cubin

Question 1
The scope of Section 717's -rights, duties and obligations- clause is 
restricted to those rights, duties and obligations set out in Sections 
251 and 252 of the Telecommunications Act of 1996. Those sections deal
exclusively with interconnection and do not apply to universal service 
contribution or reimbursement, which are dealt with in Sections 214 and 
254.  If VoIP providers are to be accorded the same rights, duties and 
obligations under Sections 251 and 252 as telecommunications service 
providers, they should also have the same social obligations, including
being required to contribute to the universal service fund.


The Honorable Anna Eshoo 

Question 1 
Yes, up to now the Internet has experienced significant growth and 
innovation precisely because the government has maintained a virtual 
hand-offs approach.  However, this so called -Net Neutrality- 
regulation, and I take strong exception to the name because I believe 
it is extremely misleading, would dramatically alter the way the 
Internet works today- replacing the freedom to innovate and American 
entrepreneurial spirit with heavy-handed government interference.
Today, consumers have a variety of choices in obtaining high speed 
internet access.  They can choose high speed internet access from 
cable, from DSL, from wireless, from satellite, and in some areas from 
new technologies such as wi-fi and wi-max systems or Broadband Over 
Power Line. According to the FCC, as of June 2005, consumers living 
in 75% of zip codes have three or more high speed lines in service to 
choose from, 60% of zip codes have four or more high-speed lines to 
choose from, and 17.5% of zip codes have ten or more high-speed lines 
to choose from.  In California, on April 27th, the California Public 
Utilities Commission voted to allow the state's electric utilities to 
deploy broadband over power line technology, and in doing so, cited a 
California PUC report that in the state's most densely populated 
areas -- metropolitan San Francisco, Los Angeles and San Diego - 
consumers have up to 23 choices for high-speed internet access.  
Indeed, among the many choices consumers have for high-speed internet 
access is that offered by Google and Earthlink which provides consumers 
with a fast lane of 1Mbps for $20 per month, or a slower lane of 
300Kbps that is offered without charge in exchange for viewing local 
advertising through Google.  (This latter offering, of course, comes 
at some cost in time spent wading through ads and in consumer privacy.) 
In San Francisco, and across the nation, the number of broadband 
providers is exploding due to the fact that anyone who is willing to 
invest has the ability to enter the business free of archaic, stifling, 
and discriminatory economic regulation.  Indeed, the number of high 
speed providers in the United States nearly tripled, from 485 to 1,270, 
between June 2004 and June 2005.  This is extraordinary growth, given 
the fact that in June 2001 there were just 160 such providers around 
the country.  One of the biggest investors in high-speed internet 
access is Google, which has found it easy to enter the market both 
through investments in both wireless and BPL technologies.  
As a result of this broad choice and intense competition, prices for 
internet access have fallen and penetration has increased.  On May 28th, 
the Associated Press reported that -Middle and working-class Americans 
signed up for high-speed internet access in record numbers in the past 
year, apparently lured by a price war among phone companies.-
Clearly, consumers are benefiting from the free market environment.  
According to the Associated Press, citing a survey by the Pew Internet 
and American Life Project:
Broadband adoption increased 59 percent from March last year to 
March 2006 among U.S. households with incomes between $30,000 and 
$50,000.
It increased 40 percent in households making less than $30,000 per 
year
It increased 121 percent among blacks.
Overall, 42 percent of adult Americans, or 84 million people, have 
broadband, compared to 30 percent a year ago.
Therefore, it is clear that the marketplace is working.  There is no 
problem that requires Congressional action.  Telephone and cable 
companies have indicated that they will not block, impair or degrade 
access to any website, and they are not doing so.  If they did,   the 
Chairman of the FCC has said that he has the authority to stop them, 
and that he will use it.  And, with the choices available, consumers 
would clearly go elsewhere.
But, all this investment, all this innovation, could come to an end 
if the government begins adding new regulation.  Wall Street has 
warned that enacting -Net Neutrality- regulations in the absence of 
a definable problem would be premature and could trigger substantial, 
negative unintended consequences.   As Craig E. Moffitt, a VP and 
senior analyst at Sanford C. Bernstein and Co., told the Senate 
Commerce Committee in March:

-Mandated -Net Neutrality- would further sour Wall Street's taste for 
broadband infrastructure investments, making it increasingly difficult 
to sustain the necessary capital investments. It would also likely mean 
that consumers alone would be required to foot the bill for whatever 
future network investments that do get made. That would result in much 
higher end-user prices, much steeper subsidies of heavy users by 
occasional ones, and, in all likelihood, a much sharper ï¿½digital divide.' 
ï¿½ The United States as a whole would, in all likelihood, fall further 
behind other countries in broadband availability and reliability.-

Many of the leading telecom manufacturers, such as 3M, ADC and Cisco, 
have all expressed similar reservations about prematurely enacting 
-Net Neutrality- regulations.
 	The Internet is the success it is today because the government 
 	has maintained a vigilant, hands-off approach that has allowed 
 	companies to innovate in direct response to the evolving wants 
 	and needs of their customers. The marketplace today is 
 	Competitive, and as the barriers to entry are low, the market 
 	is also contestable. Regulatory or legislative solutions wholly 
 	without justification in marketplace activities would stifle, 
 	not enhance the Internet.  Laws can be inflexible and difficult 
 	to fine-tune-particularly when applied to technologies that are 
 	rapidly evolving.  

Question 2
-Tiered- internet is your term, not ours.  It is inaccurate and 
misleading.  There are, today, voice networks, data networks, and 
various managed networks and virtual private networks that provide 
increased level of security and reliability for financial, governmental, 
and healthcare purposes that all operate on internet protocol and involve 
various levels of prioritization.  We are not proposing to change the 
internet experience. We have indicated that we will not block, impair 
or degrade access to any website.  The internet experience that the 
consumer has today, and that those who operate websites have today, 
they will have tomorrow.  The consumer will be in control of making his 
or her own choices with regard to the amount of speed and bandwidth 
purchased.  This is as it should be.  Consumers should not be forced to 
purchase a higher level of speed simply because a Google, or an Amazon, 
or some other company wants to profit off of offering a new service 
that would benefit from a higher speed.
There is nothing that telephone or cable companies have proposed that 
would inhibit the next Jeff Bezos to build an on-line bookstore, or the 
next Google to come along.  Indeed, to the contrary, locking new -Net 
Neutrality- rules in place would actually hurt new, innovative companies 
from competing against established Internet companies as such rules 
would make it more difficult for start-up companies to differentiate 
themselves in the market.
 Currently, Google is spending $800 million on servers and other 
 electronics to be deployed all over the country to speed access to its 
 websites.  How many start ups have $800 million on hand to do the same 
 thing?  The fact is that one way a start-up can compete with Google, 
 and one way consumers would benefit from more competition for Google-
 type services, is if the start-up could purchase private network 
 services to compete on a more equal footing.
Allowing commercial arrangements with companies that seek to purchase 
high levels of security and reliability from network providers may be 
one way for new companies to distinguish themselves in the market and 
compete with incumbents like Google and Amazon.    
Our member companies simply want to deliver an additional choice-both 
to consumers and to business.  

Response for the Record by Paul Misener, Vice President for Global 
Public Policy, Amazon.com

VIA EMAIL AND US MAIL


June 7, 2006


The Honorable Anna Eshoo
Member
Subcommittee on Telecommunications and the Internet
Committee on Energy and Commerce
U.S. House of Representatives
Washington, DC  20515

Dear Representative Eshoo:

	Thank you very much for your support for meaningful, 
	enforceable -net neutrality- legislation.  Thank you also for 
	your two additional questions after the Subcommittee's recent 
	hearing on the subject.  Please accept my apologies for being 
	so tardy with my response; I was traveling in Europe.  My 
	answers follow each of your questions below:

Q1.As indicated in my opening statement, I have great concerns about 
where this legislation could lead the Internet, and your testimony 
certainly does nothing to allay those fears. In Silicon Valley, we take 
it as an article of faith that the reason the Internet has flourished 
and become the most important instrument of change in our lifetime is 
its open architecture. Anyone in the world can post virtually anything 
they wish on the Net, and it can be viewed by anyone else in the world, 
without barriers. Most broadband providers say the concerns you and I 
share regarding the preservation of "Net Neutrality" are speculative 
and farfetched. So, is this a real problem? Is it necessary to protect 
"Net Neutrality"?

A1. Yes, the problem is real, and net neutrality needs to be protected 
by law, as it was before last summer.  It reasonably is an article of 
faith that the openness of the Internet was the reason it flourished 
with the obvious benefits to consumers and innovation.  But, in ways 
never before possible, consumer broadband Internet service providers 
(the phone and cable companies) recently have acquired the technical 
means and regulatory permissions to restrict that openness, and 
several of their top executives have announced their plans to do so.  
And, because there are, and will be for the foreseeable future, only 
one or two such network operators widely available to consumers, they 
have the ability to constrict content choice without losing business.

Amazon seeks to reinstate the historic non-discrimination rules, 
dropped by the FCC last summer, in order to ensure that our customers 
retain unimpaired access to our current and future content and services 
without us having to seek permission from network operators, both here 
and abroad.

Some of these network operators say that government should let the 
competitive free market work.  Yet, as I noted before, the market is 
far from competitive:  in the U.S., according to the FCC, some 99.5% 
of residential broadband subscribers get their advanced (broadband) 
Internet access from a phone company or a cable company and, of 
course, such a duopoly is not meaningfully competitive.  (The 
situation is at least as bad elsewhere around the world, where 
state-owned operators often have an absolute monopoly.)  The network 
operators also say net neutrality would regulate the Internet for the 
first time.  Not true.  As I indicated above, consumer Internet access 
has been regulated.  Until last summer, federal non-discrimination 
rules governed most, and arguably all, American consumers' Internet 
access.  Similar rules are in place, but under attack, in other 
countries, including Germany.

So we are on the side of maintaining the open paradigm of the 
Internet.  It has been good for our customers and for innovative 
companies, including many in Silicon Valley.  Years from now, we hope 
to see vibrant competition among broadband network operators.  But 
until then, we will continue to oppose efforts by the network operators 
to leverage their position over access to artificially constrain 
consumer choice and content provider innovation. 

Q2.There's been a lot of discussion about "tiers" on the Internet, and 
I'd like you to help clear up what we're really talking about. The 
telephone companies maintain that they need to have the flexibility to 
manage the network to ensure performance and security. Internet 
companies that I have spoken with acknowledge that these are important 
concerns, and support some sort of controls that would manage the 
traffic for the benefit of all. Please distinguish for us what network 
management is necessary to make the Internet function well for all of
us and what network management would likely have only an 
anti-competitive purpose?

A2.  The fairly simple answer is that network management, with few 
exceptions (e.g., for law enforcement and anti-spam efforts) should 
be allowed only on a non-discriminatory basis - i.e., without regard 
to the source or ownership of the bits being transmitted.  That is, 
network operators may decide to prioritize (give faster speeds to), 
e.g., Internet video services over, say, transmission of static data 
files, but they may not prioritize based on the source of the Internet 
video service or who owns the video bits.  Or they may choose to 
prioritize telemedicine traffic over all other traffic.  But they must 
not be allowed to favor one health care organization over another.  
Otherwise the network operators become the equivalent of HMOs, 
deciding which medical services are most readily available to 
consumers.

Of course, we believe they should be allowed (as many do today) to 
charge different rates for different capacity.  But again, this sort 
of -tiering- (where, for example a 24/7 gamer would pay more per 
month than an occasional email sender, or where Amazon.com pays more 
for access than a small website because we need more capacity to 
connect to the Internet) must not be discriminatory, favoring some 
bits over others on the basis of their source or ownership.  In sum, 
we believe that non-discriminatory network management and end-user 
tiering, both at the consumer and content provider connections to 
the Internet, should be permitted.

Thank you again for your interest in net neutrality and for your 
support for reinstating longstanding nondiscrimination safeguards.

Sincerely yours,


Paul Misener
Vice President for Global Public Policy
Amazon.com	



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