    [House Hearing, 110 Congress]
    [From the U.S. Government Publishing Office]

            H.R. 5353, THE INTERNET FREEDOM PRESERVATION ACT OF 2008
    =======================================================================

                                    HEARING

                                   BEFORE THE

              SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED TENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                  May 6, 2008

                                   __________

                               Serial No. 110-112

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

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    2011

                        COMMITTEE ON ENERGY AND COMMERCE

        JOHN D. DINGELL, Michigan,
                 Chairman
    HENRY A. WAXMAN, California
    EDWARD J. MARKEY, Massachusetts
    RICK BOUCHER, Virginia
    EDOLPHUS TOWNS, New York
    FRANK PALLONE, Jr., New Jersey
    BART GORDON, Tennessee
    BOBBY L. RUSH, Illinois
    ANNA G. ESHOO, California
    BART STUPAK, Michigan
    ELIOT L. ENGEL, New York
    ALBERT R. WYNN, Maryland
    GENE GREEN, Texas
    DIANA DeGETTE, Colorado
        Vice Chairman
    LOIS CAPPS, California
    MIKE DOYLE, Pennsylvania
    JANE HARMAN, California
    TOM ALLEN, Maine
    JAN SCHAKOWSKY, Illinois
    HILDA L. SOLIS, California
    CHARLES A. GONZALEZ, Texas
    JAY INSLEE, Washington
    TAMMY BALDWIN, Wisconsin
    MIKE ROSS, Arkansas
    DARLENE HOOLEY, Oregon
    ANTHONY D. WEINER, New York
    JIM MATHESON, Utah
    G.K. BUTTERFIELD, North Carolina
    CHARLIE MELANCON, Louisiana
    JOHN BARROW, Georgia
    BARON P. HILL, Indiana               JOE BARTON, Texas
                                             Ranking Member
                                         RALPH M. HALL, Texas
                                         J. DENNIS HASTERT, Illinois
                                         FRED UPTON, Michigan
                                         CLIFF STEARNS, Florida
                                         NATHAN DEAL, Georgia
                                         ED WHITFIELD, Kentucky
                                         BARBARA CUBIN, Wyoming
                                         JOHN SHIMKUS, Illinois
                                         HEATHER WILSON, New Mexico
                                         JOHN B. SHADEGG, Arizona
                                         CHARLES W. ``CHIP'' PICKERING,
                                             Mississippi
                                         VITO FOSSELLA, New York
                                         STEVE BUYER, Indiana
                                         GEORGE RADANOVICH, California
                                         JOSEPH R. PITTS, Pennsylvania
                                         MARY BONO, California
                                         GREG WALDEN, Oregon
                                         LEE TERRY, Nebraska
                                         MIKE FERGUSON, New Jersey
                                         MIKE ROGERS, Michigan
                                         SUE WILKINS MYRICK, North Carolina
                                         JOHN SULLIVAN, Oklahoma
                                         TIM MURPHY, Pennsylvania
                                         MICHAEL C. BURGESS, Texas
                                         MARSHA BLACKBURN, Tennessee
    _________________________________________________________________

                               Professional Staff

     Dennis B. Fitzgibbons, Chief of
                   Staff
    Gregg A. Rothschild, Chief Counsel
       Sharon E. Davis, Chief Clerk
     David L. Cavicke, Minority Staff
                 Director

                                      (ii)
              Subcommittee on Telecommunications and the Internet

                   EDWARD J. MARKEY, Massachusetts, Chairman
    MIKE DOYLE, Pennsylvania             FRED UPTON, Michigan
        Vice Chairman                        Ranking Member
    JANE HARMAN, California              J. DENNIS HASTERT, Illinois
    CHARLES A. GONZALEZ, Texas           CLIFF STEARNS, Florida
    JAY INSLEE, Washington               NATHAN DEAL, Georgia
    BARON P. HILL, Indiana               BARBARA CUBIN, Wyoming
    RICK BOUCHER, Virginia               JOHN SHIMKUS, Illinois
    EDOLPHUS TOWNS, New York             HEATHER WILSON, New Mexico
    FRANK PALLONE, Jr., New Jersey       CHARLES W. ``CHIP'' PICKERING,
    BART GORDON, Tennessee                   Mississippi
    BOBBY L. RUSH, Illinois              VITO FOSELLA, New York
    ANNA G. ESHOO, California            GEORGE RADANOVICH, California
    BART STUPAK, Michigan                MARY BONO, California
    ELIOT L. ENGEL, New York             GREG WALDEN, Oregon
    GENE GREEN, Texas                    LEE TERRY, Nebraska
    LOIS CAPPS, California               MIKE FERGUSON, New Jersey
    HILDA L. SOLIS, California           JOE BARTON, Texas (ex officio)
    JOHN D. DINGELL, Michigan (ex
        officio)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Edward J. Markey, a Representative in Congress from the
      Commonwealth of Massachusetts, opening statement...............    10
    Hon. Cliff Stearns, a Representative in Congress from the State
      of Florida, opening statement..................................    11
    Hon. Mike Doyle, a Representative in Congress from the
      Commonwealth of Pennsylvania, opening statement................    13
    Hon. Fred Upton, a Representative in Congress from the State of
      Michigan, opening statement....................................    14
    Hon. Jane Harman, a Representative in Congress from the State of
      California, opening statement..................................    15
    Hon. Mike Ferguson, a Representative in Congress from the State
      of New Jersey, opening statement...............................    16
    Hon. Hilda L. Solis, a Representative in Congress from the State
      of California, opening statement...............................    17
    Hon. Charles W. ``Chip'' Pickering, a Representative in Congress
      from the State of Mississippi, opening statement...............    18
    Hon. Lois Capps, a Representative in Congress from the State of
      California, opening statement..................................    19
    Hon. Mary Bono Mack, a Representative in Congress from the State
      of California, opening statement...............................    20
    Hon. Anna G. Eshoo, a Representative in Congress from the State
      of California, opening statement...............................    21
        Prepared statement...........................................    22
    Hon. John Shimkus, a Representative in Congress from the State of
      Illinois, opening statement....................................    22
    Hon. Bart Stupak, a Representative in Congress from the State of
      Michigan, prepared statement...................................    23
    Hon. Gene Green, a Representative in Congress from the State of
      Texas, opening statement.......................................    24
    Hon. George Radanovich, a Representative in Congress from the
      State of California, opening statement.........................    25
    Hon. John D. Dingell, a Representative in Congress from the State
      of Michigan, prepared statement................................   114

                                   Witnesses

    Walter B. McCormick, Jr., president and chief executive officer,
      United States Telecom Association..............................    26
        Prepared statement...........................................    27
    Michele Combs, vice president, communications, Christian
      Coalition of America...........................................    29
        Prepared statement...........................................    32
    Mitch Bainwol, chairman and chief executive officer, Recording
      Industry Association of America................................    36
        Prepared statement...........................................    38
    Steve Peterman, executive producer, Hannah Montana, Writers Guild
      of America, West...............................................    42
        Prepared statement...........................................    43
    Kyle McSlarrow, president and chief executive officer, National
      Cable & Telecommunications Association.........................    45
        Prepared statement...........................................    47
    Scott Savitz, chief executive officer and founder, shoebuy.com...    62
        Prepared statement...........................................    64
    Christopher Yoo, professor of law, founding director, Center for
      Technology, Innovation and Competition, University of
      Pennsylvania...................................................    66
        Prepared statement...........................................    68
    Ben Scott, policy director, Free Press...........................    70
        Prepared statement...........................................    73

                               Submitted Material

    H.R. 5353........................................................     2
    Wall Street Journal editorial entitled, ``An Alternative to
      Network Neutrality,'' dated April 12, 2008.....................   116
    The American Conservative Union, et al., letter of May 6, 2008 to
      Mr. Markey.....................................................   118
    Conservative coalition, letter of March 10, 2008 to Members of
      Congress.......................................................   120
    National Association of Realtors, letter of May 6, 2008 to the
      Subcommittee...................................................   121
    Jean M. Prewitt, president and ceo, Independent Film & Television
      Alliance, letter of May 6, 2008 to Messrs. Markey and Upton....   122

            H.R. 5353, THE INTERNET FREEDOM PRESERVATION ACT OF 2008

                                  ----------

                              TUESDAY, MAY 6, 2008

                  House of Representatives,
             Subcommittee on Telecommunications
                                      and the Internet,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 9:30 a.m., in
    room 2322 of the Rayburn House Office Building, Hon. Edward
    Markey (chairman) presiding.
        Members present: Representatives Markey, Stearns, Doyle,
    Upton, Harman, Ferguson, Solis, Pickering, Capps, Walden, Bono,
    Eshoo, Shimkus, Stupak, Green, Radanovich, Deal, Gonzalez, and
    Terry.
        Staff present: Amy Levine, Tim Powderly, Mark Seifert,
    Colin Cromwell, David Vogel, Philip Murphy, Neil Fared, and
    Garrett Golding.
        Mr. Markey. Welcome to the Subcommittee on
    Telecommunications and the Internet. Today's hearing is on
    legislation offered by myself and my subcommittee colleague,
    Mr. Pickering, from Mississippi, entitled ``H.R. 5353, The
    Internet Freedom Preservation Act of 2008.''
        [H.R. 5353 follows:]
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    OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN
            CONGRESS FROM THE COMMONWEALTH OF MASSACHUSETTS

        Mr. Markey. Since the beginning of this Congress, indeed
    since our first subcommittee witness, the inventor of the World
    Wide Web, Sir Tim Burners-Lee, testified, we have held a series
    of hearings that have given us a glimpse of the future of the
    Internet. We heard testimony from Chad Hurley, the founder of
    YouTube, as well as from top executives from TiVO, Real
    Networks, Sling Media, and others.
        The commercial success of many of these companies and their
    future business plans are predicated upon openness in the
    Internet's architecture and the freedom to innovate that has
    marked the Internet since its inception. Sir Tim, the inventor
    of the World Wide Web, urged us to ``make sure the Web itself
    is the blank sheet, the blank canvas,'' something that does not
    constrain the innovation around the corner.
        The wonderful thing about the Internet, Sir Tim also
    reminded us, is that no one needs to ask anyone's permission to
    innovate, to get their voice heard, to launch a new service or
    business enterprise. In this sense, it is the most level
    playing field for commercial opportunity ever invented, and its
    worldwide scope has offered help to foster community and
    cultural communications across the planet.
        Yet now we are faced with a choice. Can we preserve this
    wildly successful medium and the freedom it embodies, or do we
    permit network operators to fundamentally alter how the
    Internet has historically functioned? Do we retain a level
    playing field, Sir Tim's blank canvas or entrepreneurial entry?
    Or do we allow the imposition of new fees and the artificial
    creation of slow lanes and fast lanes for content providers on
    the Internet?
        Some people might ask, well, at $500 a share, why can't
    Google pay for special treatment? The reality is that at $500 a
    share, Google can afford to pay. Yet the reality is that this
    is precisely the wrong question to ask. Instead, the question
    is whether Larry Page and Sergei Brin, the two young founders
    of Google, could have paid when they were mere grad students
    launching their idea. Same question for Jerry Yang at Yahoo!
    back in the late '90s or Jeff Bazos at Amazon.com or Mark
    Andresin who invented the mosaic browser, which later became
    Netscape, when he was at the University of Illinois at Urbana,
    Champlain in the early '90s. That is the question to ask.
        And the answer, of course, is no. Those inventors and
    entrepreneurs could not have created the companies that have
    become part of Internet lore if they had had to pay cable or
    phone companies large sums of money up front just to get access
    to consumers.
        This debate is not over whether carriers can or cannot
    perform network management. It is not about whether carriers
    can fight piracy or spam or help parents control content. It is
    not about whether some network traffic, such as emergency
    communications, can be prioritized. Neither is it about whether
    network neutrality is synonymous with copyright theft.
        In each one of the instances that I just mentioned, it is
    not any of those things. And the legislation only extends
    Internet freedom principles to lawful content, not unlawful
    content and not unlawful activity but only to lawful content.
    And so this whole idea that this legislation helps piracy is
    100 percent wrong. It is a red herring. We should actually put
    an aquarium out here. There are so many red herrings floating
    around to mislead about what the intent of net neutrality is.
    It does not protect piracy at all, and I just wish people would
    stop saying it.
        The question is whether, in the name of network management,
    policymakers permit carriers to act in unreasonable anti-
    competitive fashion. In a more perfect network, there would be
    such massive bandwidth to render these issues moot. In a more
    perfect marketplace, there would be four or five high speed
    broadband competitors offering consumers ample choice.
        But until then, I strongly believe that we should enshrine
    basic principles of openness and fairness and ensure that the
    FCC is a cop on the beat, able to ensure these principles are
    upheld in the marketplace. In this way, we can preserve the
    best of what the Internet is, even as it evolves.
        The bill is quite straightforward. It establishes
    overarching principles rather than regulations to guide policy
    in this area. It then requests an examination of the market and
    current practices, requires the FCC to hold several broadband
    summits around the country to solicit suggestions and opinions.
    And finally, task the FCC with reporting the results and any
    recommendations back to Congress.
        I believe that this is an eminently reasonable path to
    pursue, and I thank all of our witnesses for coming today to
    give us their views on the bill. I thank you, and with that,
    the time of the chair has expired. And I recognize the
    gentleman from Florida, Mr. Stearns, for an opening statement.

     OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF FLORIDA

        Mr. Stearns. Good morning, and thank you, Mr. Chairman. I
    think this is a very important hearing. H.R. 5353 is far-
    reaching; although, it is just a study. And I think it is
    vitally important that we have a hearing. And I appreciate the
    witnesses here, and I look forward to their opening statements
    and the questions we might ask.
        Now, this bill, H.R. 5353, is billed as just a study;
    however, my colleagues, a closer examination demonstrates that
    it is more than just about a study. First, it establishes a
    specific broadband policy by amending Title I of the
    Communications Act to make it the policy of the United States
    of America to prohibit ``unreasonable interference from or
    discrimination by network operators.'' It then requires the FCC
    to launch a proceeding into whether that policy has been
    violated.
        Under this legislation, the FCC would have to commence a
    proceeding, not merely an inquiry but a proceeding, thus giving
    the FCC a green light to engage in rulemaking without further
    congressional action.
        Now, this sort of procedure would cause numerous problems,
    in my opinion. Most troubling, of course, is that no one can
    agree on what constitutes unreasonable interference and
    discrimination. Yet the bill provides no definitions, does not
    require examination of the status of competition before even
    imposing new restrictions. This bill creates vague and
    undefined regulations that frankly would chill investment and
    innovation at a time when there is tremendous growth.
        Why would we seek to regulate a marketplace that is already
    advancing vigorously? You know, I think a lot of us remember
    the Ronald Reagan quote. If I moves, we tax it. If it is
    successful, we regulate it. And if it fails, we subsidize it.
        My colleagues, the Internet is booming. North American
    communication providers invested in an estimated $70 billion in
    infrastructure just last year alone. And in the U.S. today,
    there are nearly 1,400 broadband providers competing to serve
    American consumers. The marketplace has never been more
    competitive. Why would we want to mess with success? Why would
    we regulate a rousing success into a potential failure?
        Furthermore, this legislation does not allow for legitimate
    network management. Some proponents of network regulation
    believe that the networks that comprise the Internet should be
    treated no differently than telephones or even as we go back to
    the railroads or old time waterways. That view of the Internet
    does not provide comport with today's reality.
        Today, Internet traffic has grown exponentially. Thirteen
    years ago, a loyal cadre of hobbyists sent e-mail to each other
    and engaged in some rudimentary Web surfing. Now, more than a
    billion people use the Internet to view and exchange audio and
    video files as well as play interactive games that involve
    sophisticated graphics.
        In addition, the Internet is rapidly replacing traditional
    telephone and cable lines as a means of conducting voice
    conversation and distributing movies and other video
    programming. Network operators need to be able to manage
    Internet traffic, especially with bandwidth intensive video
    traffic, in order to ensure that the consumers just simply
    continue to enjoy the Internet experience.
        Without network management, we would be faced with network
    congestion that would make rush hour on the 14th Street Bridge
    look like a Sunday drive in the country. For instance, if you
    were watching a single high-definition movie over the Internet
    consumes as much bandwidth as a Web surfer who loads 35,000 Web
    pages. At the current rate of growth, in the year 2010, 20
    typical U.S. households will use as much Internet capacity as
    the entire world did in 1995.
        Broadband networks will need to be sophisticated and agile,
    imposing network regulation either through legislation or at
    the FCC would prevent broadband providers from legitimately
    managing their networks.
        Most importantly, there does not appear to be any need for
    this regulation. Broadband competition is increasing and coming
    from new medias such as wireless and satellite. Broadband
    prices are falling as speeds offered by providers are rising.
    Regulation would simply stifle the investment necessary to
    prepare for the continued growth in Internet traffic.
        So in closing, common carrier principles such as
    nondiscrimination might have made sense for waterways,
    railroads, and telephones. But if you want a 21st Century
    communications media, we should not rely on the old ways to
    achieve regulatory modeling.
        Thank you, Mr. Chairman. I offer my time.
        Mr. Markey. The gentleman's time has expired. The chair
    recognizes the gentleman from Pennsylvania, Mr. Doyle.

       OPENING STATEMENT OF HON. MIKE DOYLE, A REPRESENTATIVE IN
             CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

        Mr. Doyle. Thank you, Mr. Chairman. Mr. Chairman, think
    about it. The Internet is the First Amendment come alive. Our
    media is no longer a one voice to many listeners. Instead,
    media begins with me, and I get to choose what I do, what I
    see, what I listen to, and what I read. The cost of a printing
    press or TV station no longer holds the speaker back from
    sharing their message with the world around us, the world that
    exists online. I think that all parties testifying here today
    would agree that the state of the Internet is very different
    today than it was a decade ago or even during the debate over
    the franchising bill.
        As the Internet has changed, so have the reasons that my
    friends base their opposition to net neutrality. First they
    said it would be impossible to define that neutrality, much
    less write regulations about it. And secondly, that net
    neutrality was a solution in search of a problem.
        Both of these presumptions are now wrong. When this issue
    came up 2 years ago, Congress was told that there are too many
    definitions about what net neutrality is. Today, the largest
    telecommunication company in the world, AT&T, is living under a
    workable definition of net neutrality that all parties agreed
    to when they merged with Bell South. There, the FCC wrote a
    definition that works for all sides. It was a big win for
    consumers, for innovators, and other entrepreneurs, and for
    AT&T.
        And Congress was told that net neutrality is a solution in
    search of a problem. That too is no longer the case. We have
    documented cases now where network operators are telling
    consumers how they can and how they cannot fill the pipe
    they're buying with the content they want.
        Wi-fi routers, telecommuting into their office, voice-over-
    the-Internet calls, peer-to-peer file sharing of legal,
    licensed content, including video programming are all examples
    of things that have been limited by Internet providers.
        Now, it is true that consumers are uploading more content
    on the Internet and broadband companies offer slower upload
    speeds than download. But instead of investing in faster
    speeds, some have tried to limit uploads based on a particular
    kind of service. They claim that they need to manage
    congestion, to manage their networks, and I agree with that.
    Clearly they are managing their networks now. Some of that
    management is a good thing. Viruses and spam need to be
    eliminated.
        But the question is, can they be managed in a way that
    doesn't hurt a particular protocol or application or content
    provider? I believe they can. That is net neutrality.
        I believe this problem is misframed. Some people want the
    conversation to be about how they can manage Internet scarcity.
    We should be talking about how to achieve abundance with the
    principles that made the Internet great. Anti-trust law is
    inadequate to deal with this question. A network operator could
    choose not to offer a small competing company better service
    and force it to take them to court, spending years in a
    protracted legal battle.
        Instead, Mr. Chairman, the time has come for rules of the
    road, for predictably for those who own networks and for those
    who innovate on those networks. Mr. Chairman, I thank you, and
    I yield back.
        Mr. Markey. Gentleman's time has expired. The chair
    recognizes the gentleman from Michigan, Mr. Upton.

       OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF MICHIGAN

        Mr. Upton. Thank you, Mr. Chairman. I would first like to
    apologize to the panel and my colleagues that I will be unable
    to stay for this entire hearing due to an Energy and Air
    Quality Subcommittee hearing where I serve as ranking
    Republican, which will begin very soon. I do feel strongly
    about the issue, and I want to make an opening statement before
    I depart.
        I don't quite understand why this is a legislative and not
    an oversight hearing. I think we can all agree that we have
    succeeded in our congressional oversight role. We first heard
    about the issue over 8 years ago, and there is no solid
    evidence of consumers being blocked from any content or
    application on the web.
        And the very few times that consumers have been troubled
    rightly so with something, the issue has been resolved without
    imposing regulations or legislation indicating that the market
    forces indeed work. A mix of market forces, consumer demand,
    and oversight from this body has allowed the Internet economy
    to flourish.
        One Web site, YouTube, took up the same bandwidth in '07 as
    the entire Internet did in 2002. That is an amazing story, and
    just as amazing is the network's ability to keep up with
    demand. There is competition at all levels of the Internet, and
    broadband employment and use continues to grow. Our hands-off
    policy is working.
        Some say this bill just creates a study. Well, that is not
    quite true. It codifies network neutrality into the
    Communications Act and only then tells the FCC to study the
    implications. This bill takes us down a dangerous path.
    Adopting legislation like this now will short circuit the
    evolution of the Internet in my view. And to meet the growing
    capacity demands of advanced Internet services and
    applications, carriers need the flexibility to experiment with
    different business models as well as to manage network
    congestion and quality of service in the short term while they
    invest and innovate in the long term.
        But as soon as we attempt to legislate or regulate,
    technology will evolve much too quickly for the policymakers to
    keep pace. The old axiom if it ain't broke, don't fix it
    certainly applies here. The proponents of H.R. 5353 claim that
    the bill is just trying to restore nondiscriminatory
    requirements to the Internet. But we have been told that the
    Internet was built on principles of nondiscrimination and that
    network operators were required to abide by nondiscrimination
    requirements prior to 2005.
        Well, that is not quite accurate. Internet backbone
    services have never been regulated. They interact based on
    private peering relationships that are not subject to FCC or
    any other regulation. And cable and satellite broadband
    providers have never been subject to regulations. Wireless
    broadband services don't even really get off the ground until
    '05 and have never been regulated either.
        Yet despite the unregulated environment, the sky has not
    fallen. Quite the opposite. Consumers are enjoying
    revolutionary technology, and the market will continue to
    evolve and deliver what consumers expect in service. Advocates
    of network regulation argue that all they really want to do is
    turn the clock back to before the FCC's decision in '05 that
    classified wireline broadband Internet access services as
    information services.
        Proponents of H.R. 5353 do want to turn back the clock.
    They do, but not to how the Internet was regulated in 1995.
    They want to turn back the clock to the 19th Century, when
    waterways and railways operated under common carrier
    requirements. That defies common sense if we are trying to
    foster a 21st Century communications medium.
        We hear a lot about how the world came to an end when the
    FCC declared in '05 that wireline Internet access services were
    information services just like cable modem services. Well, that
    is based on a fundamentally faulty premise, that the Internet
    operated under a nondiscrimination regime from its inception
    until '05. That would be news to Internet backbone providers,
    which have never been subject to FCC regulation. It also would
    be news to cable modem and satellite broadband providers, which
    were not subject to FCC regulation.
        Sweeping, nondiscrimination requirements would be new, and
    they would be bad for network management and broadband
    deployment. I think that everyone here today would argue that a
    consumer-driven model has worked quite well thus far. Folks
    have come to expect unfettered access, and they will tolerate
    nothing less.
        In closing, I would like to make one final point. While I
    clearly oppose this legislation, I do applaud you, Mr.
    Chairman, for distinguishing between legal and illegal content.
    I yield back.
        Mr. Markey. Thank you. I very much appreciate that.
        Mr. Upton. First base.
        Mr. Markey. Well, I appreciate that. It is like the
    difference between unlawful and illegal. Many people don't know
    unlawful is when there is an actual statute or regulation that
    has been passed against something, and illegal is a sick bird.
        Ms. Upton. Yeah.
        Mr. Markey. That is an old fourth grade joke. The chair
    recognizes the gentlelady from California, Ms. Harman.

      OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Ms. Harman. Thank you, Mr. Chairman. I was educated in
    Massachusetts, but sometimes some of this stuff just flies by
    me.
        Mr. Chairman, I am proud to be a cosponsor of your bill. I
    think it is better than the last version of your bill, which I
    also cosponsored. And I want to salute you for working closely
    with Mr. Pickering, an estimable member of our committee, and
    making this a bipartisan issue. This committee is bipartisan,
    and I think our best legislation comes when we act in a
    bipartisan fashion. So I salute you for that.
        Like most participants in the net neutrality debate, I
    believe that not all network management is bad. In Los Angeles,
    our freeway networks are hopelessly congested, and on-ramps
    have traffic lights to control the flow of cars and trucks.
    These traffic meters reduce congestion and are in the public
    interest, but they do not keep motorists from driving a car of
    his or her choice and from going anywhere that motorist wants
    to go on the freeway.
        I am skeptical that market forces alone can preserve the
    open vibrant and always improving Internet that everyone wants.
    Government should have a role in ensuring that network
    operators do not discriminate among content providers or
    especially against particular content. I deplore piracy of
    copyrighted material and the spam epidemic, as has been
    mentioned by several colleagues. I am also concerned about
    network security and the need to protect communications for
    public safety purposes.
        But the challenge is to strike the appropriate balance. I
    therefore thank you for assembling this diverse panel of
    experts, for changing your legislation so that it is
    information-driven and will give us a better understanding of
    this marketplace and this technology. And I look forward to
    learning with you and other members of the Committee about how
    to get this balance right. Thank you, Mr. Chairman.
        Mr. Markey. The gentlelady's time has expired. The chair
    recognizes the gentleman from Nebraska. I do not see him. Chair
    recognizes the gentleman from New Jersey, Mr. Ferguson, for an
    opening statement.

     OPENING STATEMENT OF HON. MIKE FERGUSON, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF NEW JERSEY

        Mr. Ferguson. Thank you, Mr. Chairman. Thank you and Mr.
    Stearns for holding this hearing on the Internet Freedom
    Preservation Act. Welcome to our witnesses, many of whom are
    well known to us. This panel represents a real strong cross
    section of interests in the industry, and we look forward to
    hearing the various perspectives.
        Anytime the subject of net neutrality comes up, I can't
    help but think of a few years back and a hearing of this
    committee as well. And with all due respect to my friend, Mr.
    Doyle, I have a different view of his characterization of the
    last couple of years. At the time, witnesses were asked--we
    went right down the row. Everyone was asked if they could
    define net neutrality, and everybody had a different answer to
    that question. To a person--nobody could provide a clear and
    definitive answer to the subcommittee.
        And in the years since then, instead of really trying to
    truly define net neutrality and determining whether and how any
    problem might actually exist, advocates have attempted to
    broaden the scope of this term and have started using these hot
    button tag lines that would probably make any PR firm proud.
        Unfortunately throughout the process, some Internet service
    providers focused on consumer satisfaction have been
    scapegoated, not only by interest groups but by the FCC, which
    seems determined to pursue regulation in lieu of private sector
    solutions. Responsible network management necessary on shared
    networks to ensure the flow of network traffic has been
    opportunistically mischaracterized as calculated ISP
    interference.
        And now with unprecedented broadband investment, industry,
    innovation, and consumer consumption, we have before us a piece
    of legislation that is an attempt to expand the potential of
    broadband that can actually stifle deployment. Ignoring a
    healthy broadband market, this legislation exacts a
    prescription that is simply not needed. And the side effects
    could be crippling to innovation and to investment and
    ultimately to the services provided to our constituents. In the
    face of undeniable free market growth, this committee should
    refrain from inserting the hand of government into the
    equation.
        But looking at the draft of this legislation, it seems that
    it attempts to go in precisely the opposite direction. Many of
    its principles effectively constitute a dangerously over-broad
    legislative dragnet that can frankly do much more harm than
    good.
        It is my recommendation that before legislating in this
    area, the committee carefully consider the consequences of
    imposing a government solution where, frankly, it is
    unwarranted.
        And finally I would like to touch on the problem of
    Internet piracy, which goes hand-in-hand with many of the
    network problems, and the providers are responsibly trying to
    solve. I know, Mr. Chairman, your reference of having an
    aquarium of red herrings. This is not a red herring. This is a
    very serious problem, and the problems of piracy are being felt
    in a very direct and a very substantial way by a major segment
    of our economy.
        Internet piracy has devastated America's creative
    industries, and it has adversely affected economic growth in
    the process. Incidentally, most of the congestion piracy causes
    results from the same peer-to-peer downloads that have made the
    job of network operator so difficult. I encourage the content
    industry and the ISPs to continue to work together in the
    private sector to reduce and eliminate the availability of
    illegal content or unlawful content that confuses consumers,
    attracts viruses, and ultimately hurts an important growth
    engine of our economy.
        Thank you again, Mr. Chairman, for this hearing. I look
    forward to hearing from our witnesses.
        Mr. Markey. The gentleman's time has expired. The chair
    recognizes the gentleman from Texas, Mr. Gonzalez. The chair
    recognizes the gentlelady from California, Ms. Solis.

     OPENING STATEMENT OF HON. HILDA L. SOLIS, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Ms. Solis. Thank you, Mr. Chairman, and thank you, Ranking
    Member Stearns for holding this important meeting. Net
    neutrality is crucial to the future of the Internet. The
    question of whether we adopt a market-based approach or lay our
    principles for net neutrality and fairness in network
    management is central to the evolution of the Internet.
        Over the past few years, we have seen incredible growth in
    the use of the Internet for a host of applications. This
    includes telemedicine, telecommuting, online education, and
    entertainment with video and music applications.
        Net neutrality and network management have become even more
    relevant as we rely more and more on Internet in our daily
    lives. Questions of unfair practices by Internet service
    providers, especially when dealing with peer-to-peer file
    transfers, has raised serious concern.
        As a member of the Los Angeles delegation, piracy of
    entertainment including music and video files are harmful to
    our local workforce and economy. While we should not
    underestimate the importance of stemming the flow of pirated
    material online, we also need more transparency of management
    practices that affect all constituents, not just those who
    download pirated songs or video. For example, high bandwidth
    applications in areas such as telecommuting, online education,
    telemedicine, are very important to many of my constituents.
    These applications will grow, as you know, in the coming years.
    We need to know how such traffic will be treated or prioritized
    by Internet service providers to ensure that these and other
    positive but not necessarily profitable uses are not negatively
    impacted.
        We also need to ensure that the innovation that has driven
    the Internet continues unabated. New and diverse innovators
    should have as level a playing field as possible with incumbent
    and more established Internet companies. And net neutrality is
    key to posturing diversity online.
        As policymakers, we need to find the balance between
    keeping the Internet traffic moving and promoting innovation,
    while also ensuring transparency in network management
    practices that benefit all users. I would like to thank the
    witnesses for being here today, and I look forward to hearing
    your comments. And I yield back the balance of my time.
        Mr. Markey. The gentlelady's time has expired. The chair
    recognizes the gentleman from Mississippi, Mr. Pickering.

      OPENING STATEMENT OF HON. CHARLES W. ``CHIP'' PICKERING, A
        REPRESENTATIVE IN CONGRESS FROM THE STATE OF MISSISSIPPI

        Mr. Pickering. Thank you, Mr. Chairman. And what I would
    like to do today is to put today's hearing in context, the
    history that this committee has had dealing with and
    confronting this issue, what we have seen in the private
    sector, and the principles as we go forward on this
    legislation.
        The Internet has been a great American success story,
    probably one of the greatest examples of free market capitalism
    that we have ever seen in the entire history of the world. And
    it has been driven by a number of principles that characterize
    it. One, it has been private-sector led. It was not regulated
    by the government, and this Congress has taken a position that
    we would not tax Internet. So no taxation, openness, private-
    sector led.
        Commissioner Powell back in the early days of the Bush
    administration set out principles for how we would see network
    neutrality and define network neutrality. Now, Commissioner and
    Chairman Powell is probably one of the most recognized free
    market advocates, de-regulatory advocates. But he saw the
    purpose of having an open network so he set the principles out.
        It has been maintained by another Republican chairman,
    Kevin Martin. And this committee last year, in the last
    Congress, excuse me, as we have laid out the COPE Act, we
    reaffirmed in that legislation network neutrality principles.
    In fact, we codified them, and in some of the negotiations, we
    had agreed to do a proceeding much further than where this bill
    is. This bill does codify those principles first expressed in
    most part by Chairman Powell, then reaffirmed by Kevin Martin.
    And it has been a successful approach of setting what the
    principles are and then being able to have enforcement on a
    case-by-case basis.
        Now there are some who question whether the FCC has the
    authority to enforce on a case-by-case basis these principles
    of network neutrality, the principles of openness, which have
    given us the greatest free market capitalist example and
    telecommunications policy in this century.
        So I think that this legislation is very helpful that it
    says very clearly we will codify these principles, but I do not
    want the government intervention and regulation to try to
    define in a very intrusive way some type of regulatory
    framework on network neutrality. The case-by-case is working.
        If we call for, and this bill does call for, additional
    hearings and comments from around the country, I believe it is
    a good way to have accountability, as we see the context of
    pretty intense concentration of the industry of
    telecommunications. Are we going to maintain a private-sector
    led openness for the Internet and for consumers and a bedrock
    of the freedom that everybody can get anything on the Internet
    that they so choose? Or will we see exclusives on content? We
    are now seeing exclusives on devices in the telecommunications
    industry and the iPhone. What does it take for one step to say
    we are not only going to have an exclusive arrangement on a
    device, but we then do exclusives on content? And then
    upsetting the great principle of openness and freedom that we
    have had on the Internet.
        So that is why we want to send a very strong signal that we
    do not want government intervention. We do not want government
    regulation, but we want the private sector to continue to take
    the leadership role in keeping an open policy and an open
    business model. And that is my purpose of joining with Chairman
    Markey on this legislation. And I thank you, Mr. Chair.
        Mr. Markey. The gentleman's time has expired. The chair
    recognizes the gentlelady from California, Ms. Capps.

       OPENING STATEMENT OF HON. LOIS CAPPS, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Ms. Capps. Thank you, Mr. Chairman, for holding this
    important and much anticipated hearing and for introducing your
    bill, to our witnesses for appearing today and their testimony,
    which we will enjoy hearing.
        I expect that today we are going to hear many versions of
    what it means to have a truly open and neutral Internet. Like
    many of my colleagues, I understand that some form of
    reasonable network management is to be expected. However, I
    also believe that nondiscrimination is paramount to ensuring
    free speech and commerce online. And that is why I support H.R.
    5353 and its provisions to guard against discrimination and
    degradation of content.
        The Internet is an incredible communications tool that has
    forever changed access to information and connectivity
    throughout the world. But it is also a tool for economic,
    social, and civic empowerment. So this hearing, to me, is about
    more than bytes and traffic. It is about more than packets and
    networks. It is about preserving the ingenuity and genius of
    this incredible platform, this touchstone of American
    innovation.
        So I look forward to the testimony of our witnesses, and
    thank you again, Mr. Chairman, for holding this hearing.
        Mr. Markey. Gentlelady's time has expired. The chair
    recognizes the gentleman from Oregon, Mr. Walden.
        Mr. Walden. Thank you, Mr. Chairman. I am going to waive my
    opening statement and issue an early apology. We have a
    competing hearing on energy downstairs. So I will be back.
        Mr. Markey. The gentleman may reserve. The chair recognizes
    the gentlelady from California, Ms. Bono.

     OPENING STATEMENT OF HON. MARY BONO MACK, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Ms. Bono Mack. I thank the chair. It is not necessary for
    me to give a list of examples of how the Internet has impacted
    our lives. We have all heard these stories before on this
    committee. Additionally, we are also all aware of the
    discussions surrounding network neutrality or network
    management or whatever title that each opposing side has tried
    to give the issue to gain an edge while making their argument.
        This issue was highlighted in the hearings leading up to
    and the subsequent markup of the COPE Act in 2006, and the
    general talking points have not changed significantly since
    that time. What is clear to me is that H.R. 5353 would increase
    the government's hand in regulating the Internet. Both sides of
    this discussion make interesting points; however, like most
    arguments which turn political, the volume increases and each
    side begins to speak past one another. I think this is largely
    the case with the debate before us today. It is also why I
    continue to feel advocating for strong, intellectual property
    protections needs to remain at the forefront of all discussions
    related to the Internet.
        I have been very outspoken about ISPs and their efforts to
    crack down on illegal downloading. Additionally, it is widely
    understood the theft of digital creations online, whether it be
    a movie, software, or a song, has a terrible impact on our
    economy. In short, digital piracy results in a loss of American
    jobs.
        I approach the issue at hand, as I do most technological
    discussions, by asking myself what is best for the creators of
    content and the protection of intellectual property rights
    online. Today illegal downloading costs the creative community
    billions of dollars annually. It has also begun to take its
    toll on ISP networks. That is why I am pleased that ISPs and
    creative interests are acting in concert to take steps to
    combat online piracy.
        Can more be done by ISPs? Of course. Can the creative
    community do more? Yes. However, at a time when industry is
    beginning to address this issue, I think it would be remiss for
    us as a body to interfere in these efforts. I think this bill
    would do that.
        I would also like to express my concerns of relying on the
    FCC to combat piracy. We ask the Commission to do a lot. In my
    opinion, sometimes they get it, and other times, they don't.
    Regardless, most of the time, decisions take a while. In that
    context, I don't see how the FCC would be organizationally able
    to successfully combat something as complex as online piracy
    with an appropriate level of effectiveness.
        I look forward to hearing the discussion today.
    Additionally I will closely follow the level of cooperation
    between ISPs and content creators in the fight against online
    piracy. While I am currently hopeful that industry can work
    together to tackle this problem, I will continue to ask what is
    best for the creators of content and the protection of
    intellectual property rights online.
        Again, thank you, Mr. Chairman. And I yield back the
    balance of my time.
        Mr. Markey. The time of the gentlelady has expired. The
    chair will now recognize the gentlelady, Anna Eshoo.

     OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Ms. Eshoo. Thank you, Mr. Chairman, for having this
    hearing. Welcome to the distinguished panel of witnesses. And I
    want you to know, Mr. Chairman, that I am proud to be a
    cosponsor of this legislation and like legislation that was in
    the last Congress.
        I think that all of my colleagues have made very
    interesting points. I think Mr. Pickering's description of what
    the Internet is, what it represents, the enormity of it, the
    extraordinary changes that the Internet has brought not only on
    businesses but people in their personal lives, an entire
    education system, the blue chip reputation of the United States
    of America being the inventor of this, all of the technologies
    that are a part of it, the effect that it has had on our
    intelligence community. As a member of the House Intelligence
    Committee, and certainly Ms. Harman who served on that
    committee with distinction, we understand this and appreciate
    it in a very, very special way.
        Now, what has made it successful? If there were choke
    points in the beginning, we wouldn't be able to say what we are
    saying, what we all acknowledge. And so this effort is very
    clearly, very simply and profoundly to keep it the way we just
    described it. I think that were it not this powerful tool in so
    many ways, in all of its manifestations, people wouldn't be
    laying claim to or want to keep or cut off some parts of it for
    themselves. I don't have anything against the companies and the
    people that are engaged in this and help with the broadband.
        But we know--actually this room wouldn't be filled with
    most of the dark suits that are here today were it not for the
    fact that there are huge dollars involved in this. And I want
    people to be able to make money and enjoy the market, but I
    think that it needs to be kept open. Open, open, open,
    accessible, accessible, accessible. It is not.
        We know that it is not. There are all kinds of fancy words,
    but we want to keep it open. That is what this effort is about.
    It is the hallmark that really created the Internet or has made
    it successful and revolutionized the country and the world in
    the process. So I think that we have newfound problems with
    this. And if that were not the case, we wouldn't have the
    stakeholders here to kind of defend where they are. All good
    people, but we need to go back and appreciate what the
    democratization of the Internet was founded on. And that is
    what this effort is about.
        And so I look forward to the debate. I think that this is a
    smart bill, and the language that the legal counsel draws up, I
    think it is consistent with the values of our country. And that
    is why it is as powerful as it is. We have the most powerful
    principles, and I think they need to be a part of this effort
    too.
        So thank you, Mr. Chairman. Look forward to the testimony
    and the debate.
        [The prepared statement of Ms. Eshoo follows:]

                        Statement of Hon. Anna G. Eshoo

        Mr. Chairman, thank you for drafting this important
    legislation and for holding another hearing on preserving free
    and open communications networks.
        Openness of the Internet has actually been its hallmark
    since it was created--the ability of any person anywhere in the
    world to reach out and access any content that someone else has
    made available on the Web. The openness of the Internet
    revolutionized business, it changed our economy, and it has
    transformed our everyday lives.
        Despite this history of openness the FCC has allowed
    carriers to begin ``walling'' in the Internet. They want to
    control which sites consumers will be able to download music
    from, where they will be able to watch live video and which
    blogs will have full access to the best service. This threatens
    the very existence of today's Internet. That's why Net
    Neutrality legislation should be enacted.
        The bill would establish for the first time a broadband
    policy for the country which includes the freedom to access the
    Internet without discriminatory interference and to promote
    open networks and access to applications and devices. The
    policy also would prohibit network owners from degrading
    content. This policy mirrors the same non-discriminatory rules
    which have always existed for our telephone networks and for
    the Internet prior to 2005.
        If enacted, the bill would require the FCC to examine
    whether carriers are blocking access to lawful content,
    applications, or services.
        Similar to the media ownership town hall meetings, the bill
    would mandate that within 1 year of enactment, the FCC must
    conduct eight broadband summits throughout the country. The
    purpose of the summits would be to bring together consumer
    advocates, small business owners, local governments, unions,
    academia, etc.
        This is a well crafted bill that if enacted would preserve
    the Internet the way it was conceived, open, open, open,
    accessible, accessible, accessible. Thank you, Mr. Chairman for
    holding this important hearing.
                                  ----------

        Mr. Markey. The gentlelady's time has expired. The chair
    recognizes the gentleman from Illinois, Mr. Shimkus.

      OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. Shimkus. Thank you, Mr. Chairman. I am going to be
    brief, but I disagree with a lot of what my colleague has said.
    I have two issues. One is who manages the pipe and who makes a
    determination over lifesaving telemedicine information versus a
    movie download. Issue one.
        Two, the FCC has a process. There is very limited
    complaints, and there is a dispute resolution process right
    now. I said two, and really three is--in rural America we need
    broadband. This delays broadband rollout to rural America. And
    the example we can use is the auction, the most recent auction
    in which we didn't get the value from the spectrum based upon
    the FCC putting open access as part of the criteria. There will
    be some who will disagree with that, but I truly believe that
    is what has happened.
        And so if you want to make sure that you can have an
    availability of lifesaving telemedicine over a movie download
    in those critical times, if you want to deploy broadband to
    areas--I still have areas that have dialup in my congressional
    district. This process does not help rural America get to
    equality. We want to talk about equality, let us talk about
    equality for the people to access the World Wide Web at a high
    speed and not put additional constraints on it. Thank you, Mr.
    Chairman, I yield back.
        Mr. Markey. The gentleman's time has expired. The chair
    recognizes the gentleman from Michigan, Mr. Stupak.
        Mr. Stupak. Mr. Chairman, I will waive as I will be
    bouncing between the two hearings, and I want to use the extra
    time for questions.
        [The prepared statement of Mr. Stupak follows:]

                         Statement of Hon. Bart Stupak

        Thank you, Chairman Markey, for holding this hearing on
    H.R. 5353, the ``Internet Freedom Preservation Act of 2008".
        This legislation would ensure that all lawful content on
    the Internet, no matter where it comes from, no matter where it
    goes, is treated equally by network providers.
        Hospitals in Northern Michigan depend on equal access to
    high speed broadband networks to provide healthcare through the
    Upper Peninsula Telehealth Network (UPTN).
        The Upper Peninsula Telehealth Network represents 42 sites
    consisting of 10 Critical Access Hospitals, 4 community
    hospitals, a tribal health center, a summer camp for handicap
    children, and many other healthcare facilities. It has
    significantly improved access to health care, provided
    education opportunities for health professionals, and increased
    overall efficiency of healthcare in the Upper Peninsula.
        These Upper Peninsula hospitals would have difficulty
    affording any additional charges to ensure that they have the
    same reliable access to high speed broadband.
        I support keeping the Internet open and ensuring that
    everyone has access to whatever lawful content they choose.
    However, there are challenges that we need to address to ensure
    open and equal quality access to all users.
        Peer-to-Peer file sharing applications have proven to be
    powerful tools that slow down the network, using significant
    amounts of bandwidth to the detriment of other users. In
    addition, with the increase in distribution speeds, piracy has
    also grown.
        Not only is copyright law being violated, but excessive
    amounts of bandwidth are also consumed in the process. This
    reduces the quality of service for other users of the network.
        In order to confront these abuses, network providers need
    flexibility to manage their networks.
        Congress also needs to take into account the capacity
    constraints that currently exist.
        The Internet is a limited resource in constant need of
    private investment to expand. Since its founding, Internet
    usage has grown exponentially. Today, over 1 billion people in
    the world use the Internet. 10 million new people are logging
    on every month.
        More music is sold today on iTunes than CDs. 90.4 billion
    e-mails were sent daily in 2007. Today, YouTube alone consumes
    as much bandwidth as the entire Internet did in the year 2000.
        To keep up with this demand, private companies have been
    investing billions of dollars to provide faster connections to
    the network and expand its capacity. Private companies that are
    investing significant amounts of capital to provide a service
    should be able to seek fair compensation for it.
        Congress must be sure that in recouping these investments,
    network providers are not restricting access to healthcare
    providers and other critical non-profit institutions that
    depend on reliable broadband access can continue at fair and
    reasonable prices.
        Chairman Markey, thank you again for holding today's
    hearing. I look forward to working with you to address these
    challenges to ensure open and equal quality access to all
    users.
                                  ----------

        Mr. Markey. Gentleman's time is reserved. The chair
    recognizes the gentleman from Texas, Mr. Green.

       OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF TEXAS

        Mr. Green. Thank you, Mr. Chairman. And like my colleague
    from Michigan, I will be bouncing between the two, but I don't
    know if I will be back in time to do my questions so I will
    give my statement.
        First, I want to thank you for holding the hearing on the
    Internet Freedom Preservation Act. Today's panel represents a
    broad range of interests, and I look forward to hearing from
    the witnesses about the effects of the legislation if it
    becomes law.
        One of the main goals of this subcommittee is to promote
    the expansion of broadband deployment. The benefits of
    broadband are far-reaching, and just as important is the
    ability of end-users to access the content and the services
    they are choosing. The FCC has successfully promoted and
    maintained open and nondiscriminatory practices and taken
    action when necessary to investigate and address alleged
    violations with its openness principles.
        I strongly support the network openness principles adopted
    by the FCC in 2005 and feel the commission, as well as network
    operators, have adhered to these principles and successfully
    addressed issues that were not in line with the four
    principles. Last week, the Communication Workers Union of
    America sent a letter to members of our subcommittee expressing
    concern that, among other things, this legislation goes beyond
    the FCC's broadband policy statement and does not take into
    account the need for reasonable network management.
        At the FCC hearing at MIT earlier this year, the FCC
    Commissioner Copp stated the FCC's job is to figure out when
    and where to draw the line between discrimination and
    reasonable network management. I share these concerns as some
    network management practices are necessary to ensure the
    maximum number of consumers have quality broadband service. And
    I hope to hear the views from today's panel on the language of
    Section 3 with regard to nondiscriminatory network management
    practices.
        Use of network management practices is not exclusive to
    public network operations in the U.S. Internet to schools use
    management practices and network operators in Japan, which
    offer the highest residential broadband connections in the
    world. Buffering, queueing, scheduling, marketing, marking,
    labeling, parsing, replicating, prioritizing, modifying,
    metering, policing, collision avoiding, packet resetting, and
    packet rescinding are all necessary traffic management
    practices that allow triple-play services, voice, data, and
    video, to be delivered reliably with efficiency over converged
    networks. Limiting the flexibility of network operators to
    respond to traffic and congestion issues by doing this would
    limit them from providing them the quality services the vast
    majority of users experience.
        It would also impede investment in network infrastructure,
    which we explored in previous hearings, and much needed in this
    country to expand availability and speed of broadband service.
    The companies that would build these networks would be less
    likely to make these investments. They are not able to manage
    traffic on them to ensure that the vast majority of their
    customers are experiencing quality services. At a time when we
    need to be encouraging this investment, I want to make sure
    that we do not take steps that will hamper it.
        Mr. Chairman, I strongly support the efforts to maintain
    the open Internet and the FCC policy on the principles, and
    Congress and the FCC should ensure that no legal Internet
    application service or content receives discriminatory
    treatment from network operators. But I am concerned this
    legislation may be too broad and will not allow for efficient
    management. And again I look forward to the hearings and look
    forward to our continuing consideration of the bill.
        Mr. Markey. The gentleman's time has expired. The chair
    recognizes the gentleman from California, Mr. Radanovich.

     OPENING STATEMENT OF HON. GEORGE RADANOVICH, A REPRESENTATIVE
                IN CONGRESS FROM THE STATE OF CALIFORNIA

        Mr. Radanovich. Thank you, Mr. Chairman and Mr. Ranking
    Member. Market forces react more quickly and strongly than any
    government regulation could hope to do, and they are more
    effective. And that is why I don't see a need for the
    regulation before us today. In other words, the current system
    works, and we do not need to try to fix what is not broken.
        We have seen the Internet come so far since its inception
    to places and uses that no one could have predicted and at a
    volume that was unimaginable. It would have been irresponsible
    for Congress to try to regulate the Internet based on what it
    looks like when it was created or based on where they thought
    it would go. And that is why Congress showed great foresight by
    resisting the urge to constrain the Internet with regulation
    that they deemed appropriate at that time. And instead
    recognizing its unique potential and allowing it to flourish
    within the free market.
        The Internet today is a direct result of that decision. It
    would be just as irresponsible for us to act today,
    particularly given a lack of evidence of a need for such
    action. No one here can really know what the Internet is going
    to look like 10 years from now, but what we do know is that it
    will not reach its unimaginable potential if we make these
    drastic alternations to our nation's broadband policy. The
    Internet of tomorrow will be a direct result of how we proceed
    on this issue today.
        And I would like to thank the witnesses for being here
    today and especially to discuss this legislation with us. And I
    do look forward to a productive hearing. Thank you, Mr.
    Chairman.
        Mr. Markey. The gentleman's time has expired.The chair
    recognizes the gentleman from Georgia, Mr. Deal. The gentleman
    waives his time. So the chair sees no other members seeking
    recognition at this time.
        So we will turn to our very distinguished panel, and we
    will begin by recognizing Mr. Walter McCormick. Mr. McCormick
    is the president and chief executive officer of the United
    States Telecom Association, an organization consisting of the
    Nation's largest phone companies. We welcome you back, Mr.
    McCormick. Whenever you are ready, please begin.

     STATEMENT OF WALTER MCCORMICK, PRESIDENT AND CHIEF EXECUTIVE
               OFFICER, UNITED STATES TELECOM ASSOCIATION

        Mr. McCormick. Thank you, Mr. Chairman. Mr. Chairman,
    Ranking Member Stearns, members of the subcommittee. Thank you
    for the opportunity to appear before you today. The United
    States Telecom Association represents broadband service
    providers, manufacturers, and suppliers. As such, we are
    committed to broadband investment and deployment, to increased
    broadband penetration, and to bringing the full promise of
    broadband to all Americans.
        And what extraordinary promise that is. Broadband is
    bringing consumers new competition and choice in entertainment.
    It is advancing the economy. It is creating new jobs,
    particularly in rural areas. It is improving the environment
    through telecommuting. Broadband is bringing new innovations to
    healthcare. It is improving education, and broadband is
    improving personal security and emergency response.
        So broadband deployment is important, vitally important.
    Speaker Pelosi recognized the importance of broadband
    deployment at the beginning of this Congress in announcing an
    innovation agenda. And I know, Mr. Chairman, that broadband
    deployment is an objective of yours. Indeed, your initiative
    early in this Congress to map where broadband is and is not
    available in an effort to help target investment to where it is
    most needed is in direct furtherance of this goal.
        But H.R. 5353, in amending the Communications Act to
    establish a national broadband policy, does not establish a
    national policy that calls for broadband deployment. Nowhere
    does it call for increased investment or expanded penetration.
    And in fact, the language in this bill raises the kinds of
    uncertainties that could chill investment.
        Mr. Chairman, we have three concerns with this bill. Our
    first concern is that it has been the longstanding practice of
    this subcommittee to study first and to legislate second. This
    bill takes the opposite approach. It establishes a national
    broadband policy first and then directs a circumscribed study
    aimed at determining whether this new policy is being met and
    how best to enforce it. We believe the study should come first,
    and in that regard, there has been much work done by expert
    federal agencies and departments that is worth the
    subcommittee's review and analysis before legislating--work by
    the FCC, by the FTC, and work by the Department of Justice.
        Indeed, the FCC currently has underway three separate
    proceedings on network practices, and in the past few weeks,
    the commission has held public hearings in Boston and at Palo
    Alto. As a result we respectfully suggest that this legislation
    is premature. The FCC in particular should be allowed to
    continue its examinations, conduct its work, and conclude its
    proceedings before Congress considers legislating.
        Our second concern is that the terms used in the bill are
    ambiguous. Until the FCC defines what is and is not
    unreasonable and discriminatory with a high degree of
    precision, an exercise that may well lead to protracted
    litigation, those who are designing, constructing, and managing
    networks and those who are developing applications do so at
    some risk.
        Our third concern is that this ambiguity, this uncertainty,
    this risk, will chill innovation, investment, broadband
    deployment, and job growth. This is something that our nation
    can ill afford. The weak state of the economy is front page
    news, yet one of the bright spots is broadband. There is growth
    in this sector with an estimated $70 billion invested in
    advanced communications infrastructure this past year.
        Mr. Chairman, very creative people are taking the potential
    of broadband and turning it into incredible life-enhancing
    tools. Congress should be careful to do no harm to avoid taking
    the creativity and innovation and investment that is occurring
    and putting it all in limbo while the government argues over
    the meaning of words. Instead, let us keep the investment and
    ingenuity flowing.
        I thank you for the invitation to join you and to share our
    perspective.
        [The prepared statement of Mr. McCormick follows:]

                   Statement of Hon. Walter B. McCormick, Jr.

        Chairman Markey, Ranking Member Stearns, Members of the
    Subcommittee: Thank you for the opportunity to appear before
    you today.
        The United States Telecom Association represents broadband
    service providers, manufacturers, and suppliers. Our member
    companies provide broadband on a fixed and mobile basis, and
    offer a wide array of voice, data and video services. You might
    say that ``we are broadband'' in that we design, build and,
    manage the advanced networks that make broadband communications
    possible.
        As such, we are committed to broadband investment and
    deployment, to increased broadband penetration, and to bringing
    the full promise of broadband to all Americans.
        And what extraordinary promise that is.
         Broadband is bringing consumers new competition
    and choice in entertainment;
         It is advancing the economy;
         It is creating new jobs, especially in rural
    areas;
         It is improving the environment, through
    telecommuting;
         Broadband is bringing new innovations to
    healthcare, like those in your state of Massachusetts, through
    the Connected Health Initiative; and in Virginia, where through
    broadband, ICU nurses who could only watch three patients at a
    time can now monitor the health of up to 50;
         It is improving education, by allowing students
    who are ill to continue to participate in classes through
    broadband connections so that they do not fall behind;
         And broadband is improving personal security and
    emergency response, with innovations like the ``Be Safe''
    program--again in Massachusetts--which is now operating at
    schools throughout the state, and provides first responders
    with on-site access to detailed, individualized information
    about local school schematics when lives are at stake and every
    second counts.
        So broadband deployment is important. Vitally important.
    Speaker Pelosi recognized this at the beginning of the 110th
    Congress by announcing an ``Innovation Agenda'' calling for
    increased broadband deployment. The 170-member Congressional
    Internet Caucus recognized this in making its number one
    objective ``promoting the growth and advancement of the
    Internet.'' The House Republican High-Tech working group
    recognized this in its call ``to remove regulatory barriers,
    and to promote new technologies to help make broadband more
    affordable for all Americans.'' It is clear that bringing
    broadband to every American is a bipartisan objective. And we
    know, Mr. Chairman, that broadband deployment is an objective
    of yours. Indeed, your initiative early in this Congress to map
    where broadband is and is not available, in an effort to help
    target investment to where it is most needed, is in direct
    furtherance of this goal.
        But H.R. 5353, in amending the Communications Act to
    establish a national ``Broadband Policy,'' does not establish a
    national policy that calls for broadband deployment. Nowhere
    does it call for increased investment, or expanded penetration.
    And, in fact, the language in this bill raises uncertainties
    that could chill investment, and bring to a grinding halt the
    development of creative and innovative uses of broadband that
    today are showing extraordinary promise.
        What does the bill language mean when it calls for the
    adoption and enforcement of protections against unreasonable
    discriminatory favoritism for content based upon its source,
    ownership, or destination? Would it be ``unreasonably
    discriminatory'' for a network operator to construct and manage
    its networks to assure the reliability of a healthcare
    application? A personal security application? What is and is
    not allowed? No one will, or can, know until the FCC defines
    these terms. And how is this to take place? Prospectively,
    through rulemaking? Retroactively, through adjudication?
        Mr. Chairman, we have three concerns with this bill:
        Our first concern is that it has been the longstanding
    practice of this Subcommittee to study first, and legislate
    second. This bill takes the opposite approach. It establishes a
    national broadband policy first, and then directs a
    circumscribed study aimed at determining whether this new
    policy is being met and how best to enforce it. We believe the
    study should come first. And in that regard, there has been
    much work by expert federal agencies and departments that is
    worth the Subcommittee's review and analysis before
    legislating:
         The FCC currently has underway three separate
    proceedings on network practices, and in the past few weeks the
    Commission has held public hearings in Boston and Palo Alto.
    The Chairman of the FCC recently told a Senate Committee that
    the Commission has the authority to address any network
    management practices that violate the broadband principles that
    the Commission has already adopted to ``preserve the open and
    interconnected nature of the public Internet.''
         The Federal Trade Commission has conducted an
    extensive investigation into the state of broadband competition
    and determined that the marketplace is moving toward more, not
    less, competition in broadband services, and it warned against
    ``the unintended side effects'' of legislation.
         The U.S. Department of Justice recently echoed the
    findings of this Federal Trade Commission report in its own
    filing of comments with the FCC.
        As a result, we respectfully suggest that this legislation
    is premature. The FCC should be allowed to continue its
    examinations, conduct its work, and conclude its proceedings
    before the Congress considers legislation.
        Our second concern is that the terms used in the bill are
    ambiguous. For example, the new national policy would prohibit
    ``unreasonable interference from and discrimination by network
    operators.'' Unreasonable and discriminatory in the eyes of
    whom? As previously stated, until the FCC defines what is and
    is not ``unreasonable'' and ``discriminatory'' with a high
    degree of precision, an exercise that may well lead to
    protracted litigation, those who are designing, constructing
    and managing networks, and those who are developing
    applications, do so at some risk.
        Our third concern is that this ambiguity, this uncertainty,
    this risk will chill innovation, investment, broadband
    deployment, and job growth.
        This is something that our nation can ill afford. The weak
    state of the economy is front page news. Yet, one of the bright
    spots is broadband. There is growth in this sector, with an
    estimated $70 billion invested in advanced communications
    infrastructure this past year. This is an extraordinary sum. By
    way of comparison, when President Kennedy committed the United
    States to landing a man on the moon in ten years, the
    government spent approximately $10 billion per year--in today's
    dollars--on the Apollo program. When President Eisenhower
    committed the Nation to building an Interstate Highway System,
    the government spent approximately $25 billion per year--in
    today's dollars. This past year, broadband service providers
    invested approximately $70 billion. And, this is private sector
    investment, not taxpayer funds.
        This investment has broad benefits. A new report by
    Connected Nation suggests that just a modest 7% increase in
    U.S. broadband adoption could create 2.4 million new American
    jobs and generate $134 billion in annual economic stimulus.
        There is much that we can do together. Congress can enact
    the Rural Utilities Service reforms that are part of the Farm
    Bill that would accelerate the deployment of broadband in
    unserved areas; it can advance public-private partnerships like
    those in the Connected Nation program which, in Kentucky, led
    to an increase in broadband penetration from 60% to 94% in just
    3 years; and it can provide for broadband mapping along the
    lines of your legislation, Mr. Chairman. Indeed, the
    Committee's leadership on this issue has already resulted in
    the FCC voting to improve its approach to data collection by
    putting in place a system to gather more and better targeted
    information on broadband adoption.
        Mr. Chairman, very creative people are taking the potential
    of broadband and turning it into incredible, life-enhancing
    tools--remote medical monitoring, online education, and new
    applications for first-responders. Congress should be careful
    to do no harm--to avoid taking the creativity and
    experimentation and innovation and investment that is occurring
    and putting it all into limbo while the government argues over
    the meaning of words. Let's not say to these innovative and
    creative thinkers: ``Hold on a minute, let's just slow down
    until the government has the chance to get a handle on all this
    and can develop a national policy to govern the management of
    the Internet.'' Instead, let's keep the investment and
    ingenuity flowing.
        Mr. Chairman, I thank you for the invitation to join you
    and to share our perspective. We look forward to working with
    you and the members of the Committee on policies aimed at
    bringing the full promise of broadband to all Americans.
                                  ----------

        Mr. Markey. Thank you very much, Mr. McCormick. Our second
    witness is Ms. Michele Combs, who is the vice president for
    communication for the Christian Coalition of America. The
    Christian Coalition is the largest conservative grassroots
    organization in the United States. We welcome you.

      STATEMENT OF MICHELE COMBS, VICE PRESIDENT, COMMUNICATIONS,
                     CHRISTIAN COALITION OF AMERICA

        Ms. Combs. Thank you, Mr. Chairman, and thank you,
    distinguished members of the committee. I also want to thank
    the chairman and Representative Pickering for their leadership
    in introducing H.R. 5353, The Internet Freedom Preservation Act
    and for standing up for millions of Americans who don't want to
    see the Internet turned into something more like cable
    television.
        Use of the Internet has allowed the Christian Coalition to
    amplify the voices of millions of hard-working, pro-family
    Americans in a way that has revolutionized their ability to be
    heard and to engage in the political process.
        Consequently, the reason the Christian Coalition supports
    net neutrality is simple. We believe that all organization,
    such as the Christian Coalition, should be able to continue to
    use the Internet to communicate with our members and with the
    worldwide audience without a phone or cable company snooping in
    our communications and deciding whether to allow a particular
    communication to proceed, slow it down, block it, or offer to
    speed it up only if the author pays to be on the fast lane.
        Unfortunately, in the last 6 months, we have seen network
    operators block political speech, block content, and block the
    most popular applications on the Internet. In every incident,
    the network operators have claimed that these actions were for
    network management purposes.
        As you know, in October 2007, the news organization
    Associated Press reported that Comcast was blocking consumers'
    ability to download the King James Bible using a BitTorrent
    technology. It has also been pointed out that Comcast's
    behavior just so happens to block access to video distribution
    applications that compete with Comcast's own programming.
        If Comcast were to create a Christian family channel, would
    the FCC allow it to block access to a competing product from
    the Christian Coalition that was distributed by a BitTorrent
    application? I have heard the cable companies argue that
    network neutrality rules would prevent them from protecting
    consumers from child pornography and other illegal content. I
    am not a network engineer, but it is my understanding that
    every major net neutrality proposal would allow the network
    operators to block illegal content. No one I know opposes that.
        The cable company's argument is disingenuous, and frankly
    it offends me as I respectfully suggest that it ought to offend
    you. Right now, the cable companies are not subject to a
    network neutrality regulation. Yet child pornography continues
    to be available over the Internet. Why should we believe that
    network neutrality would impede their ability to block this
    content when they aren't even stopping it now?
        The cable companies aren't making stopping illegal content
    a priority. What is worse, they are using network neutrality as
    an excuse for their inaction. Let us remember it was the King
    James Bible that Comcast blocked which caused the current
    controversy.
        At the FCC field hearing in Palo Alto 2 weeks ago, one
    witness noticed that if Comcast removed just two pay-per-view
    pornography channels and allocated that space for the public
    Internet, it would solve their so-called bandwidth problems.
        Why do you think the pornography industry has not supported
    net neutrality? I suggest the answer is that the pornography
    industry knows it will be able to pay premium prices to be on
    the fast lane with exceptional quality of service provided by
    the cable industry. You know who won't have the deep pockets to
    compete in this non-neutral world? Non-profit family
    organizations like the Christian Coalition.
        The Christian Coalition does not seek burdensome
    regulations. We generally believe that less government is
    better than more government, and we do not believe that
    government should censor speech. But let us be clear. Right
    now, the telephone and cable companies are investing and using
    the exact same censorship and content discrimination
    technologies that are being used by the Chinese government to
    censor speech.
        In fact, the Chinese government is currently using these
    same technologies to block the Christian Coalition speech from
    being received by its citizens. The FCC should make it clear
    that it will not allow cable and phone companies to use these
    technologies to block the lawful speech rights of the Christian
    Coalition and others.
        Increasingly, faith-based groups are turning to the
    Internet to promote their political rights and to engage in
    what Ronald Reagan called the hard work of freedom. We should
    not let the phone and cable companies interfere with that work.
    Thank you.
        [The prepared statement of Ms. Combs follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

            Mr. Markey. Thank you, Ms. Combs, very much. Our next
    witness is Mitch Bainwol. His is the chairman and chief
    executive officer of the Recording Industry Association of
    America. RIAA members create, manufacture, and distribute 90
    percent of the sound recordings produced or sold in the United
    States. We welcome you, sir.

        STATEMENT OF MITCH BAINWOL, CHAIRMAN AND CEO, RECORDING
                    INDUSTRY ASSOCIATION OF AMERICA

        Mr. Bainwol. Thank you, Mr. Chairman, Ranking Member
    Stearns, members of the subcommittee. I appreciate the
    opportunity today to share our perspective. The music industry
    is in the midst of profound change. The digital era has
    produced huge losses yet affords opportunity for our brightest
    days. Music powers the most popular TV, ``American Idol,'' the
    most popular games, ``Guitar Hero,'' and the most popular
    device, the iPod.
        Content is king. Speedy gadgets are literally empty without
    tunes. During these past 2 years, the acquisition of music has
    jumped 15 percent. But even as music becomes even more central
    to our lives, the legal share of acquisition has plummeted from
    56 percent to 42 percent. Imagine that. It is pretty sobering.
    Less than half of our music is acquired legally.
        The digital age is one where consumers want more and more
    music but are paying for less and less. The consequences of
    digital theft are real. Thousands of American job losses,
    hundreds of talented artists forced out of the business because
    investment capital is drying up. Half of the glorious
    songwriters in Nashville showed out of their love for
    creativity, all at a time when people want more and more music.
        It is ironic, but no matter how you slice it, digital
    piracy has produced brutal human and creative consequences that
    make this debate anything but academic. Back in 1999, we hit a
    sales high of $14.6 billion, all physical. Physical sales last
    year totaled only $8 billion, down 45 percent. Digital sales--
    downloads, subscriptions, and mobile--generated $2.4 billion
    last year, making up about a third of our physical loss. So far
    in 2008, the physical digital net is down another 5 percent.
        Clearly our future will be more complex than a model that
    relies on plastic or unit sales. Increasingly our economic
    foundation will be augmented by performance royalties and by
    payments for access to music through subscription services,
    mobile platforms, and potentially, ISPs. And that is why your
    hearing today is so significant.
        We are heartened by your examination of these issues and
    the emerging consensus recognizing that Internet freedom is not
    synonymous with the Wild West in which the taking of our
    property is accepted or, at best, ignored.
        Your distinction between lawful and unlawful, legal or
    illegal activity, must be the cornerstone about private market
    discussions that we will have with folks on this panel and
    public policy.
        It wasn't that long ago that ISPs used piracy to drive
    broadband growth. In amazingly transparent language, we saw
    advertising effectively encouraging the purchase of broadband
    to steal music. But many ISPs thankfully are in a different
    spot. They want to address the congestion problem that piracy
    yields and to work more closely with content to provide rich
    legal offerings with an amateur subscriber base.
        While we are seeing signs of cooperation from many ISPs,
    others would just as soon pretend that congestion was not
    fundamentally a problem directly connected to theft. Some
    prefer to cure congestion with greater efficiency, solving
    their problem but compounding ours. And some go so far to say
    that they can be smart about dealing with spyware and viruses
    but need to stay dumb when it comes to pirated music.
        If I leave you with one concept, this is it. The Internet
    ought not be a place where chaos in the name of freedom is
    allowed to reign supreme. Rather, the Internet should be a
    place where freedom coexists comfortably with respect for
    property, with a respect for order. Order means safety on the
    Internet. It means legitimate commerce. It means tools for
    parents raising their kids. It means consumers enjoy the high
    speed that they purchase without degradation because someone is
    downloading illegal porn.
        We are at a vital crossroads for the creative industry. We
    prefer to work out these matters in the private marketplace
    with our business partners. We have begun to do so, but we are
    literally running out of time. Certainly the Markey-Pickering
    bill is one way to get ISPs to focus on the piracy problem. Its
    distinction between lawful and unlawful content is a necessary
    predicate to any discussion about network neutrality and
    network management.
        We applaud you, Mr. Chairman and Congressman Pickering, for
    making this distinction the touchstone of your bill. Since we
    continue to believe, at least for now, that our marketplace
    solution with the ISPs is viable and certainly can be devised
    and implemented more quickly and flexibly than a regulatory
    proceeding, we think that the bill is a touch premature. We
    hope that the deliberations today on this legislation will help
    spur meaningful discussions and commitments to address the
    debilitating piracy challenge that we face. Thank you again for
    your leadership and for the opportunity to testify.
        [The prepared statement of Mr. Bainwol follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

            Mr. Markey. Thank you, Mr. Bainwol, very much. Our next
    witness is Mr. Steve Peterman. He is a three-time Emmy winner
    and the executive producer of the very popular television show
    ``Hannah Montana.'' He testifies today on behalf of the Writers
    Guild of America, West. We welcome you, sir. Whenever you are
    ready, please begin.

        STATEMENT OF STEVE PETERMAN, EXECUTIVE PRODUCER, HANNAH
                MONTANA, WRITERS GUILD OF AMERICA, WEST

        Mr. Peterman. Thank you, Chairman Markey, Ranking Member
    Stearns, Vice Chair Doyle, and the distinguished members of the
    Telecommunications and Internet Subcommittee. Yes, I am the
    executive producer, one of the executive producers of ``Hannah
    Montana.'' I am also a member of the Writers Guild, and I am
    here today to explain why ensuring an open online marketplace
    is critical to this country and why the Writers Guild of
    America supports H.R. 5353, The Internet Freedom and
    Preservation Act.
        When I began my writing career 20 years ago, you could
    watch ``Roseanne'', ``Cosby'', ``Cheers'', ``The Wonder
    Years'', and the series that I was lucky enough to be one of
    the original writers on: ``Murphy Brown.'' Those shows were
    considered smart, funny, sometimes touching, and even thought
    provoking. And they were all made by independent production
    companies. Unfortunately, in the years since then, those
    companies have disappeared. The unraveling of the financial
    interest and syndication rules which began in 1992 has allowed
    for the greatest consolidation of media we have ever seen.
        Instead of a rich marketplace of ideas, today we have seven
    conglomerates controlling nearly all of the information and
    content that we see. Because this small group now acts as
    producer, studio, and network, there has been an inevitable
    stifling of creativity and diversity. And because they maintain
    a chokehold over distribution, there has been nowhere else for
    the creative community to go until the Internet.
        It is now abundantly clear that the Internet is the new
    television. Today you can watch episodes of almost any series
    you want, anytime you want, on your computer or your phone. And
    tomorrow you will be downloading first-run movies. We in the
    Writers Guild are determined not to repeat the old media
    experience.
        During our recent strike, many writers became interested in
    creating original content for the Web. Some have already signed
    deals with new media providers, while others aren't even
    waiting for a deal. They are posting original content for free
    for the sheer joy of being able to work without getting notes
    from 30 executives with no sense of humor.
        Because, unlike the current studio system, the Internet
    makes it possible for content creators to retain both ownership
    and control of the quality of what they create. The Internet
    also provides the American public with a virtually unlimited
    menu of news, information, and entertainment content from which
    to choose.
        But all of these bold new possibilities rely on net
    neutrality. In order for writers to reintroduce diversity back
    into media and entertainment, we must have a level playing
    field on an Internet without gatekeepers, a system that is not
    at the mercy of those who control distribution and who seek to
    leverage that control to create a fee system or worse, as we
    currently experience, to own and control content.
        I commend the FCC and Chairman Martin for their diligent
    work to hold ISPs accountable to the policy principles as
    adopted by the commission in 2005. ISPs should not have the
    unilateral authority to disable program applications or to
    block or discriminate against access to legal Web sites,
    especially without appropriate transparency to content
    providers and consumers.
        I also strongly support codifying these principles into the
    law of the land as H.R. 5353 would do. Only with a federal law
    will we have the legal standing to demand that the Internet
    remain the open and vibrant marketplace that it is today. And
    when we talk about an open marketplace, we do not mean a
    thieves' marketplace. The Guild, believe me, recognizes piracy
    as a major problem. Just look for ``Hannah Montana'' on
    YouTube. You will find more than 110,000 results, most of which
    were stolen and none of which provide any income to me, the
    other writers on the show, or the studio.
        The two bills that have been introduced during this session
    of Congress, Senate Bill 215 introduced by Senators Dorgan and
    Snow, and H.R. 5353 introduced by Chairman Markey and
    Congressman Pickering, specifically reference the right of
    consumers to access lawful content. Piracy is and should remain
    illegal. I applaud the work of the Motion Picture Association
    of America, the networks, the Copyright Alliance, and everyone
    else working to ensure creators and copyrights are protected.
        But the solution is not establishing new rules that may
    prevent writers and other content creators from competing at
    all. The Internet from its inception has been about innovation,
    and I am confident that innovative technology and innovative
    strategies will help to confront the problems of piracy.
        In conclusion, I have been incredibly blessed in my career.
    I grew up in a working class family in Milwaukee. My parents
    ran a mom-and-pop restaurant. They took out loans to send me to
    Harvard, hoping I would become a lawyer. I terrified them by
    becoming an actor and then a writer, but my dad lived long
    enough to see me win an Emmy. And now I am on a show that has
    made my 16-year-old son say Dad, you have made me a legend. And
    that is very cool.
        I want other writers to have the same opportunities I had,
    and even more importantly, I want my son and his children to
    have free and open access to the greatest repository of
    information in the history of the world. Thank you very much.
        [The prepared statement of Mr. Peterman follows:]

                          Statement of Steve Peterman

        Thank you Chairman Markey, Ranking Member Stearns, Vice
    Chair Doyle, and other distinguished members of the
    Telecommunications and the Internet Subcommittee.
        My name is Steven Peterman and I'm an executive producer
    and one of the writers of the Emmy-nominated series ``Hannah
    Montana.'' I'm also a member of the Writers Guild of America,
    West. I'm here today to explain why ensuring an open online
    marketplace is critical and why the Writers Guild of America
    supports H.R. 5353, the Internet Freedom and Preservation Act.
        When I began my writing career twenty years ago you could
    watch ``Roseanne,'' ``Cosby,'' ``Cheers,'' ``The Wonder Years''
    and the series on which I was lucky enough to be one of the
    original writers: ``Murphy Brown.'' These shows were all
    considered smart, funny, sometimes touching and even thought
    provoking. And they were all made by independent production
    companies.
        Unfortunately, over the years since, those companies have
    disappeared. The unraveling of the financial interest and
    syndication rules, a process that began in 1992, has allowed
    for the greatest consolidation of media we have ever seen.
    Instead of a rich marketplace of ideas, today we have seven
    conglomerates controlling nearly all of the information and
    content we see. Because this small group now acts as producer,
    studio and network, there has been an inevitable stifling of
    creativity, and diversity, and because they maintain a
    chokehold over distribution there has been nowhere else for the
    creative community to go. They've been the only game in town.
    Until the Internet.
        It is now abundantly clear that the Internet is the new
    television. Today you can watch episodes of almost any series
    you want, any time you want, on your computer or phone.
    Tomorrow, you'll be downloading first-run movies. And we in the
    Writers Guild are determined not to repeat the ``Old Media''
    experience.
        During our recent 100-day strike, many writers, became
    interested in creating original content for the Web. Some have
    already signed deals with new media providers, while other
    aren't even waiting for a deal, they're posting original
    content for free, for the sheer joy of being able to work
    without notes from thirty executives with no sense of humor.
    Because unlike the current studio system, the Internet makes it
    possible for content creators to retain both ownership and
    control of the quality of what they create. The Internet also
    provides the audience--the American public-- with a virtually
    unlimited menu of news, information, and entertainment content
    from which to choose.
        But all of these bold new possibilities rely on ``net
    neutrality.'' In order for writers to reintroduce diversity
    back into media and entertainment, we must have a level playing
    field on an Internet without gate keepers; a system that is not
    at the mercy of those who control distribution, and who seek to
    leverage that control to create a fee system or, worse, as we
    currently experience, to own and control content.
        I commend the FCC and Chairman Kevin Martin for their
    diligent work to hold ISPs accountable to the policy principles
    adopted by the Commission in 2005. ISPs should not have the
    unilateral authority to disable program applications or to
    block or discriminate against access to legal Web sites,
    especially without appropriate transparency to consumers,
    content providers, and the general public. I also strongly
    support codifying these principles into the law of the land, as
    HR 5353 would do. Only with a federal law will we have the
    legal standing to demand that the Internet remain the open and
    vibrant marketplace of ideas it is today.
        But when we talk about an open marketplace we don't mean a
    thieves marketplace. The Guild recognizes that piracy is a
    major problem. I've experienced this first hand--just look for
    Hannah Montana on You Tube; you'll find more than 110,000
    results, many of which were stolen, and none of which provide
    any income to me, the other writers of the show, or the studio.
    The two bills on Internet preservation that have been
    introduced during this session of Congress--Senate Bill 215,
    introduced by Senators Dorgan and Snowe, and H.R. 5353
    introduced by Chairman Markey and Congressman Pickering,
    specifically reference the right of consumers to access lawful
    content. Piracy is and will remain illegal. I applaud the work
    of the Motion Picture Association of America, the networks, the
    Copyright Alliance, and everyone else working to ensure
    creators and copyrights are protected.
        But the solution is not establishing new rules that may
    prevent writers and other content creators from competing at
    all.
        The Internet, from its inception, has been about
    innovation, and I am confident innovative technology and
    innovative strategies will help us confront the problems of
    piracy.
        I've been incredibly blessed in my career. I grew up in a
    working class family in Milwaukee. My parents ran a `mom and
    pop' restaurant. They took out loans to send me to Harvard
    hoping I'd become a lawyer and I terrified them by becoming an
    actor and then a writer. But my dad lived long enough to see me
    win an Emmy and now I'm on a show that has made my 16-year-old
    son tell me, ``Dad, you've made me a legend.'' I want other
    writers to have the opportunities I had. But even more
    importantly, I want my son and his children to have free and
    open access to the greatest repository of information in the
    history of the world.
        In conclusion, we have seen this movie before. We content
    creators live everyday with the effects of the repeal of the
    financial and syndication rules and the resulting consolidation
    of the Nation's media outlets. Unless content creators and
    consumers have the freedom to create and access lawful content
    and services without discrimination by the Internet service
    providers who, like the television networks in Old Media, have
    a chokehold over distribution, we will be doomed to repeat our
    own history. We need rules that protect both creators and
    consumers, and ensure that the Internet is a level playing
    field for all; that consumers have the freedom to choose the
    content and services they want; and that the Internet remains
    the diverse, independent, vibrant and competitive marketplace
    of voices and visions that it is today.
        Thank You.

                             Summary of Statement:

        Over the past 15 years, due to the unraveling of the
    financial and interest and syndication rules, the country has
    experienced the largest consolidation of media in its history.
    The media conglomerates have become `vertically integrated'--
    meaning they control both the production and distribution of
    the country's news and entertainment content. This
    consolidation has stifled creativity and diversity in the
    entertainment industry and has left content creators with
    virtually no opportunities for owning their content. Writers
    and other content creators are excited by the possibility of
    producing new content directly for the Internet, where they may
    own and control the content they create. However, in order for
    them to be able to compete, they need an open online
    marketplace, free from gatekeepers that may use distribution in
    order to own, control or favor specific content or content
    providers.
                                  ----------

        Mr. Markey. Thank you, Mr. Peterman, very much. Our next
    witness is Mr. Kyle McSlarrow. He is the president and chief
    executive officer of the National Cable and Telecommunications
    Association, an organization consisting of the Nation's largest
    cable companies. We welcome you back, Mr. McSlarrow. Whenever
    you are ready, please begin.

    STATEMENT OF KYLE MCSLARROW, PRESIDENT AND CEO, NATIONAL CABLE
                    & TELECOMMUNICATIONS ASSOCIATION

        Mr. McSlarrow. Thank you, Mr. Chairman, Ranking Member
    Stearns, distinguished members of the subcommittee. I think
    this may be the sixth time I have been before the subcommittee
    to talk about net neutrality, and ordinarily it would be
    difficult to find something new. But Internet regulations is
    the gift that keeps on giving and it morphs from year to year.
        Mr. Chairman, before I took this job representing the cable
    industry and no, my son does not think I am a legend for that.
    Before even I appeared before many of you to engaged in
    spirited discussions about energy policy, I and about 15 or 20
    others founded an Internet startup. It was out in Silicon
    Valley late 1999 into 2000. And the idea was to create a
    destination site, a social networking site, that probably would
    be a less sophisticated version of what we now think of as a
    MySpace or a FaceBook.
        And this was a world, of course, that was completely a
    dialup world. And at the time, the last thing in the world we
    were worried about was whether or not the cable companies were
    going to block our ability to launch an Internet startup and
    reach our putative customers.
        In fact, we were cheering the cable industry on because we
    knew at that time that the cable industry was the only industry
    in America that had launched a huge infrastructure upgrade to
    deploy broadband nationwide. We just wanted it to go faster,
    and we wanted people to adopt broadband more quickly.
        At about the same time, of course many of you will
    remember, immediately with the advent of cable's rollout of
    broadband, came calls for Internet regulation. Back then it was
    called open access. And the FCC wisely, in my view, under then
    Democratic chairman Bill Canard, refrained from regulating
    cable. A couple years later in 2002, a Republican chairman,
    Michael Powell, affirmatively in the cable modem decision made
    it a Title I information service and thus not subject to
    economic regulation, a decision that was upheld by the Supreme
    Court in 2005 in the Brand X decision.
        I say all this because I think every one of you, in one
    form or another, has recognized that the Internet and broadband
    has been a huge success story. And everybody's vision is how do
    we keep it going. It is not irrelevant, as Mr. Upton and others
    have pointed out, that during that entire period--and I think
    we need to fix on this point because others will tell you a
    different story--cable's broadband service has never been
    regulated and has provided the platform now joined by the
    telephone companies and wireless providers that has enabled the
    creative genius of all these applications, services, and Web
    sites that we enjoy.
        So I think as we think about what the next steps are--and I
    don't dispute the policies that people have talked about and
    the vision. All of that, I think, reflects our business and
    what we want our consumers to experience as Internet, high-
    speed Internet, consumers. The question is what do we do about
    regulation.
        Mr. Chairman, as you pointed out in your opening statement,
    the distinction between lawful and unlawful content is an
    important one. And as I say in my written testimony, I
    recognize that. I congratulate you for that.
        It is interesting that out of the billions of transactions
    that have taken place on the Internet, there are four episodes
    that people cite to of malfeasance. One was swiftly dealt with
    by the FCC. Two of them, so far as I could tell, actually had
    nothing to do with Internet access. And the fourth, which I am
    happy to get into in more detail during the Q and A, involves
    peer-to-peer networking, which is a huge challenge. And I am
    not in the least bit defensive about it. I think it is a very
    complicated subject, but none of those, and certainly none of
    those in the aggregate, suggest to me, given the success that
    we have had to date, that this is the time to change course in
    a regulatory direction.
        I think what I like about the bill is the concept of having
    a study, doing the analysis, and then reporting back to
    Congress. That part of the bill seems to me an eminently
    sensible approach. And I thank you for your time, Mr. Chairman.
        [The prepared statement of Mr. McSlarrow follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

            Mr. Markey. Thank you, Mr. McSlarrow. Our next witness is
    Mr. Scott Savitz, who is the chief executive officer of
    Shoebuy.com, the Nation's fastest growing online retailer for
    footwear. Mr. Savitz founded Shoebuy after serving as a
    director at Bank Boston Roberts and Stevens. We welcome you,
    sir.

        STATEMENT OF SCOTT SAVITZ, CEO AND FOUNDER, SHOEBUY.COM

        Mr. Savitz. Thank you. Good morning, Chairman Markey, Mr.
    Stearns, and the members of the subcommittee. My name is Scott
    Savitz. I am the CEO of Shoebuy.com The good thing about doing
    Shoebuy is my kids are fans, but my wife thinks I am a legend,
    which is pretty cool. At any rate, we are proudly headquartered
    in Boston, Massachusetts. And we are now part of the IAC family
    of businesses, which has grown in recent years to own and
    operate over 60 brands, including Ask.com, Match.com,
    Citysearch, Evite, and many others.
        I appreciate you inviting me here today to share our
    company's story and to discuss the importance of preserving an
    open Internet and its implications for future entrepreneurship
    and innovation.
        Mr. Chairman, as you probably already know, the Internet is
    a major growth engine for the overall economy and continues to
    propel innovation and empower individuals. In a slowing
    economic environment, online retailing continues to look strong
    and has to date been an impressive growth story.
        Excluding online travel, in 2007, U.S. online sales grew 21
    percent to $175 billion and are projected to total $204 billion
    in 2008. One million companies worldwide now rely on the
    Internet economy for more than 50 percent of their revenue.
        I can tell you firsthand that my business fundamentally
    depends on an open Internet. We rely on consumers having
    unfettered access to our site and for us to be able to reach
    consumers whenever and wherever they live.
        We must therefore preserve consumers' rights to access
    content and service, on a nondiscriminatory basis without
    interference from network operators. What is at stake in the
    net neutrality debate is nothing less than the future growth on
    the Internet economy, innovation, entrepreneurship, and
    consumer choice.
        Mr. Chairman, in April 1999, we started Shoebuy.com, which
    is now one of the world's largest sites for shoes. Our initial
    business plan and strategy would have been quite different had
    there not been an open Internet. In a world where network
    operators would function as gatekeepers, we would have faced
    the prospect of first negotiating to buy access to consumers.
    So instead of having to raise immense institutional capital
    early on to gain access to consumers, we were able to bring a
    better mousetrap to the market by relying on hard work, savvy
    marketing, fiscal prudence, and a certain amount of luck.
        At the heart of our success is Shoebuy's focus on providing
    the best in class consumer experience. Through dedication to
    the customer in our ability to keep marketing and overhead
    costs low, we have been to offer consumers the most popular
    brands available anywhere at great prices with free shipping
    and free returns.
        With this concept and our dedication to the customer
    experience, Shoebuy has continued to grow and prosper. Shoebuy
    currently has over four-and-a-half million visitors a month,
    and what just started off as four people working out of 200
    square foot office today employs 140 Bostonians.
        We have grown our business to include partnerships with
    over 500 brands representing over 600,000 products, or what
    equates to over $3 billion in inventory available for purchase
    on the Shoebuy.com site. This is the equivalent of putting over
    15,000 shoe stores within the reach of each consumer visiting
    Shoebuy.com. Said another way, the Shoebuy site now offers
    enough footwear to outfit the entire population of
    Massachusetts.
        As part of our commitment to consumers, we continue to
    innovate and improve our offerings and capabilities. Notably,
    it was reported that Shoebuy is one of the Internet's top ten
    most visited apparel and accessory shopping sites. We were
    recognized by eTail as the number one eTailer for fulfillment,
    fulfilling at 99.6 percent with an average ship time out the
    door 1.3 days. And Shoebuy was lauded by BizRate as one of the
    top eTailers in the country for outstanding service, one of
    only three companies to win this award 5 years in a row. We
    continue to look for ways to provide customers with a better
    experience in order to maintain our status as an industry
    leader.
        However, Mr. Chairman, without an open and neutral platform
    on which to innovate, where consumers' needs and demands are
    paramount, our business may not have flourished or even begun.
    We rely on the Internet to enable our customers to access the
    Shoebuy site independent of barriers or gatekeepers. Shoebuy
    collaborates with an assortment of marketing partners, which
    includes both very large advertising and media companies as
    well as thousands of small marketing affiliates.
        These partners likewise depend on the Internet to remain a
    free-flowing medium. Each is integrated virtually with Shoebuy
    over the Internet and needs open access to continue the
    creativity and innovation behind their endeavors. Similarly,
    the Internet serves as a mediating platform to bring together
    product and other content from a diverse mix of over 500 brand
    partners ranging from global corporations to small
    entrepreneurial ventures. Unfettered access allows these
    diverse partners to all work with Shoebuy to serve the
    consumer. For consumers who are paying for Internet access,
    they have every right to expect to be able to choose the lawful
    content and services they want.
        And to suggest that Internet companies are free-riding on
    others' investments is simply belied by the facts. Shoebuy and
    its colleague companies pay network operators millions of
    dollars a year for Internet access, proportionate to the amount
    of traffic coming to their sites. Further, it is because of the
    vast investment made to the incredible array of content and
    services offered online that consumers are enticed to purchase
    broadband access in the first place.
        Ultimately, a consumer's enjoyment of the Internet has been
    and should remain based on their choice, not the consequence of
    a deal that a Web site makes with a network operator to receive
    enhanced treatment or prioritization.
        If this is permitted, future entrepreneurs cannot be
    assured of having the same opportunity that we did in that 200
    square foot office in Boston. Net neutrality from my
    perspective is someone who has been the little guy with the
    idea in 1999, to the CEO of one of the fastest growing Internet
    retailing sites, comes down to protecting innovation,
    opportunity, and consumer choice.
        Mr. Markey. If you could summarize.
        Mr. Savitz. Yes. In conclusion, I can tell you I sincerely
    believe maintaining an open Internet that rewards innovation
    and entrepreneurship is essential to stimulating economic
    growth and our ability to compete in international markets. I
    appreciate you having us here today, and I certainly do believe
    that the qualities of this legislation looks to do is certainly
    how we were able to go from being a small idea to reaching a
    worldwide marketplace in a fairly short period of time.
        [The prepared statement of Mr. Savitz follows:]

                           Statement of Scott Savitz

        Good morning Chairman Markey, Mr. Upton, and members of the
    Subcommittee. My name is Scott Savitz. I am the Chief Executive
    Officer of Shoebuy.com, which is proudly headquartered in
    Boston, Massachusetts. Shoebuy is part of the IAC family of
    businesses. IAC is the New York City headquartered Internet
    company which has grown in recent years to own and operate over
    60 brands including Ask.com, Match.com, Citysearch, Evite,
    ServiceMagic, CollegeHumor, RushmoreDrive.com, Zwinky, and many
    others. Thank you for inviting me here today to share our
    company's story and to discuss the importance of preserving an
    open Internet and its implications for future entrepreneurship
    and innovation.

                                I. INTRODUCTION

        Mr. Chairman, the Internet is a major growth engine for the
    overall economy and continues to empower individuals and propel
    innovation. In a slowing economic environment, online retailing
    continues to look strong and has to date been an impressive
    growth story. Excluding online travel, online sales grew 21%
    last year to $175 billion and are projected to total $204
    billion in 2008. One million companies worldwide now rely on
    the Internet economy for more than 50% of their revenue. It's
    the universality and openness of the Internet that's made such
    growth possible.
        I can tell you first hand that my business fundamentally
    depends on an open Internet. We rely on consumers having
    unfettered access to our site and for us to be able to reach
    consumers whenever and wherever they live.
        We must, therefore, preserve consumers' rights to access
    content and services on a non-discriminatory basis, without
    interference from network operators. What's at stake in the net
    neutrality debate is nothing less than the future growth of the
    Internet economy, innovation, entrepreneurship, and consumer
    choice.

              II. SHOEBUY.COM: ENTREPRENEURSHIP WITHOUT PERMISSION

        Mr. Chairman, in April of 1999, we launched Shoebuy.com,
    which is now one of the world's largest sites for shoes. Our
    initial business plan and strategy would have been quite
    different had there not been an open Internet. In a world where
    network operators would function as gatekeepers, we would have
    faced the prospect of first negotiating to buy access to
    consumers, much as cable channels have had to run the gauntlet
    to gain carriage. So instead of having to spend capital early
    on to simply gain access to consumers, we were able to quickly
    bring a better mousetrap to the market by relying on hard work,
    savvy marketing, fiscal prudence, and a certain amount of luck.
        At the heart of our success is Shoebuy's focus on providing
    the best in class experience for the customer. Through
    dedication to the customer and our ability to keep marketing
    and overhead costs low, we have been able to offer consumers
    the most popular brands available anywhere, at great prices,
    with free shipping and returns.
        With this concept and our dedication to the customer
    experience, Shoebuy has continued to grow and prosper. Shoebuy
    currently has over 4.5 million visitors per month, and what
    started off as just four people working out of a 200 square
    foot office, today employs 140 Bostonians.
        We have grown our business to include partnerships with
    over 500 brands representing 600,000 products, or what equates
    to $3 billion in inventory available for purchase. This is the
    equivalent of putting over 15,000 shoe stores within the reach
    of each consumer visiting Shoebuy.com. To give you a more vivid
    example, we now offer enough footwear to outfit the entire
    population of Massachusetts.
        As part of our commitment to consumers, we continue to
    innovate and improve our offerings and capabilities. Notably,
    Hitwise reported that Shoebuy is one of the Internet's Top Ten
    most visited apparel and accessory shopping sites. We were
    recognized by eTail as the ``#1 e-tailer'' for fulfillment at
    99.6%, with an average ship time (out the door) of 1.3 days.
    And Shoebuy was lauded by BizRate as one of the top eTailers in
    the country for outstanding service--one of only three
    companies to win this award 5 years in a row. We continue to
    look for ways to provide customers a better experience, better
    service and better prices.
        However, Mr. Chairman, without an open and neutral platform
    on which to innovate, where consumers' needs and demands are
    paramount, our business may not have flourished or even begun.
    We rely on the Internet to enable our customers to access the
    Shoebuy site independent of barriers or gatekeepers. Shoebuy
    collaborates with an assortment of marketing partners, which
    includes very large advertising and media companies as well as
    thousands of small marketing affiliates.
        Our partners likewise depend on the Internet to remain a
    free-flowing medium. Each is integrated virtually with Shoebuy
    over the Internet and needs open access to continue the
    creativity and innovation behind their endeavors. Similarly,
    the Internet serves as a mediating platform to bring together
    product and other content from a diverse mix of over 500 brand
    partners, ranging from global corporations to small
    entrepreneurial ventures. An open Internet allows these diverse
    partners to seamlessly work with Shoebuy in serving customers.
        Our customers, similarly, have every right to expect to be
    able to reach our store. Consumers pay for broadband access and
    should be free to choose the lawful content and services they
    want. Shoebuy and its colleague companies, likewise, pay
    network operators millions of dollars a year for Internet
    access proportionate to the amount of traffic coming to their
    sites. So to suggest that Internet companies are free-riding on
    other's investments is simply belied by the facts. To the
    contrary, it is because of the vast investment made in the
    incredible array of content and services offered online that
    consumers are enticed to purchase broadband access in the first
    place.
        Ultimately, a consumer's enjoyment of the Internet has
    been, and should remain, based on their choice, not the
    consequence of a deal that a Web site makes with a network
    operator to receive enhanced treatment or prioritization.
        If this is permitted, future entrepreneurs cannot be
    assured of having the same opportunity to do what we did in
    that 200 square foot office in Boston. Net neutrality, from my
    perspective, as someone who has been the ``little guy'' with
    the idea in 1999, to the CEO of one of the fastest growing
    Internet retailing sites, comes down to protecting innovation,
    opportunity and consumer choice.

                                III. CONCLUSION

        Maintaining an open Internet that rewards innovation and
    entrepreneurship is essential to stimulating economic growth
    and for our ability to compete in international markets. If it
    were not for this type of open platform, Shoebuy would have
    been even further challenged in its efforts to emerge 9 years
    ago. We might not exist today had it not been for some basic
    non-discrimination principles, and we would certainly not have
    been able to compete as we have against some of the largest
    retailers in the shoe industry. With the Internet as a
    frictionless space for connectivity, Shoebuy is able to bring
    maximum efficiency to streamlining supply chains and to
    satisfying the needs of its customers.
        I want to thank the Chairman and Representative Pickering
    for their leadership in introducing H.R. 5353, the ``Internet
    Freedom Preservation Act.'' It is my understanding that this
    legislation codifies a policy of promoting openness,
    competition, and innovation for consumers on the Internet.
    Certainly, these are the very qualities that have allowed
    Shoebuy to reach a worldwide marketplace in only a few short
    years. My colleagues at IAC and I look forward to continuing to
    work with Congress and the FCC to ensure we preserve an open
    Internet. Thank you.

                                 * * * * * * *

                                  ----------

        Mr. Markey. Thank you, Mr. Savitz, very much. Our next
    witness is Christopher Yoo, who is a professor of law and
    communications at the University of Pennsylvania Law School. He
    has written extensively on telecommunications policy matters
    and also clerked for the United States Supreme Court. We
    welcome you, sir.

       STATEMENT OF CHRISTOPHER YOO, PROFESSOR OF LAW, FOUNDING
     DIRECTOR, CENTER FOR TECHNOLOGY, INNOVATION, AND COMPETITION,
                       UNIVERSITY OF PENNSYLVANIA

        Mr. Yoo. Thank you, Mr. Chairman, Ranking Member Stearns,
    members of the subcommittee. I am grateful for the opportunity
    to be here before you today. In my testimony, I would like to
    highlight two larger themes that are often overlooked in the
    network neutrality debate.
        First, the Internet is undergoing a fundamental
    transformation. During the Internet's early years, the Internet
    employed a fairly uniform technology to connect a fairly
    uniform group of end users who were running a fairly uniform
    set of applications. Specifically, the Internet relied almost
    exclusively on technologies developed by telephone companies to
    enable university-based researchers to share e-mail and text
    files.
        All of that has begun to change. The Internet has become a
    mass market phenomenon that now reaches over 70 percent of all
    American adults and a growing number of people worldwide. As a
    result, Internet traffic has growth at a breathtaking rate,
    expanding almost 50 percent each year for the past several
    years. Internet traffic is not only growing in terms of size
    but also in variety and sophistication.
        During the Internet's initial phase, the primary
    applications were e-mail and Web browsing. For these
    applications, delays of a fraction of a second were virtually
    unnoticeable. The current Internet is increasingly dominated by
    more sophisticated applications, such as streaming media,
    online gaming, telemedicine, and virtual worlds, which are much
    more bandwidth intensive and much less tolerant of delay. The
    most important development is the deployment of IP video, which
    some expert estimate will cause traffic to grow at a rate of 90
    to 100 percent a year.
        Network providers are pursuing a number of strategies to
    meet this rapidly increasing demand. Verizon is investing $23
    billion to make its file system available to roughly half of
    its subscriber base. This system can support upload and
    download speeds up to 20 megabytes per second. AT&T is pursuing
    a different strategy, committing $6.5 billion to deploy its U-
    verse based system, which is centered on a telephone technology
    known as VDSL to 60 percent of its service areas. These
    developments have forced cable companies to respond with
    Comcast investing additional billions to upgrade portions of
    its network to DOCSIS 3.0, capable of supporting download
    speeds of up to 50 megabytes per second. Thus, technologies now
    vary widely from provider to provider, and because these
    technologies are not being deployed throughout any one provider
    service area, technologies even vary among the different
    geographic areas served by a single network provider.
        But perhaps the most important and often overlooked
    development is the emergence of wireless as a major broadband
    competitor. The most recent FCC data revealed that wireless has
    skyrocketed from having no subscribers at the beginning of 2005
    to controlling 35 million subscribers and 35 percent of the
    market for high-speed lines as of June 2007. Published reports
    indicate that wireless broadband has continued to grow rapidly
    since that time.
        The result is that the broadband industry is becoming
    increasingly competitive. Even network neutrality proponents
    can see that an increase in competition undercuts the
    justification for regulatory intervention. The industry also
    employs a wider variety of technologies than ever, with each
    technology being susceptible of different problems and
    different solutions. These considerations underscore the
    problems associated with any one-size-fits-all solution to the
    Internet.
        Each provider must make decisions that involve difficult
    tradeoffs based on their best guess of what the future will
    bring. The difficulty of anticipating which of these solutions
    will prove best in each context is underscored dramatically by
    the AOL/Time Warner merger. When it was announced in 2001, many
    regarded the walled garden approach in which AOL gave
    preferential treatment to its own proprietary content as a
    profound threat to the Internet. These threats never
    materialized, demonstrated most eloquently by Time Warner's
    announcement that it was selling off AOL at a loss of over $200
    billion.
        My second point is to draw on the lessons of past
    regulatory efforts to impose access mandates similar to network
    neutrality. These past regulatory efforts have found that
    interconnection and nondiscrimination mandates only work when
    the interface and the product being regulated is relatively
    simple. As the Supreme Court recognized in its Trinko decision,
    the situation is quite different when the product and interface
    are complex. When that is the case, disputes over access are
    likely to be highly technical and extremely numerous given the
    incessant complex and constantly changing interaction between
    providers.
        Thus, in order to protect against what the court called a
    death by 1,000 cuts, any regulator would have to undertake a
    fairly comprehensive oversight of essentially all facets of the
    business relationship between the parties. The challenge of
    doing so would be particularly demanding in industries like
    broadband, which are undergoing rapid technological change.
    This has led many commentators to conclude that any attempts to
    mandate access to such complex technologies are likely to prove
    futile.
        Indeed, past efforts to impose similar access regimes, such
    as the controversy over protocol conversion and vertical
    switching services under the computer inquiries, leased access
    to cable television networks, and unbundled access to network
    elements under the 1996 Act have become bogged down in
    incessant controversies and litigation.
        These problems demonstrate the potential dangers of
    regulatory intervention and underscore the importance of making
    sure that the scope of intervention is commensurate with the
    scope of the problem. It bears noting that the OECD, the
    Federal Communications Commission over multiple occasions over
    the past 2-and-a-half years, the Justice Department, the
    Federal Trade Commission, and leading Internet gurus David
    Farber and Bob Kahn have concluded that the factual record does
    not justify the type of regulatory intervention that proponents
    seek.
        Mr. Markey. Mr. Yoo, if you could summarize this.
        Mr. Yoo. There is a long history of the Internet adjusting
    to solve these problems by itself. The better solution is to
    pursue what I suggest, is what I have called network diversity
    in which providers are permitted to experiment with different
    approaches and let the choices of the consumers control the
    outcome. A case-by-case----
        Mr. Markey. OK, thank you.
        Mr. Yoo [continuing]. After-the-fact approach would strike
    a better balance.
        [The prepared statement of Mr. Yoo follows:]

                        Statement of Christopher S. Yoo

        Mr. Chairman, Ranking Member Stearns, Members of the
    Subcommittee, I am grateful for the opportunity to appear
    before you today. In my testimony, I would like to highlight
    two larger themes that are often overlooked in the network
    neutrality debate.
        First, the Internet is undergoing a fundamental
    transformation. During the Internet's early years, when the
    National Science Foundation initially supported civilian
    backbone services, the Internet employed a fairly uniform
    technology to connect a fairly uniform group of end users who
    were running a fairly uniform set of applications.
    Specifically, the Internet relied almost exclusively on
    technologies developed by telephone companies to enable
    university-based researchers to share e-mail and text files.
        All of that has begun to change. The Internet has become a
    mass market phenomenon that now reaches over 70% of all
    American adults and a growing number of people worldwide. As a
    result, Internet traffic has grown at a breathtaking rate. From
    1990 to 2002, the total volume of Internet traffic doubled each
    year except for 1995 and 1996, when the volume experienced an
    eight- or nine-fold increase each year. Starting in 2003,
    Internet traffic has grown roughly 50% to 60% each year, but
    even that rate still poses more than its share of challenges.
        Internet traffic is growing not only in terms of size, but
    also in sophistication. During the Internet's initial phase,
    the primary applications were e-mail and Web browsing. For
    these applications, delays of a fraction of a second were
    virtually unnoticeable. The current Internet is increasingly
    dominated by more sophisticated applications such as streaming
    media, online gaming, telemedicine, and virtual worlds, which
    are often much more bandwidth intensive and much less tolerant
    of delay. The most important development is the deployment of
    IP video, which some experts estimate will cause that traffic
    to grow once again at a rate of 90% to 100% each year.
        Network providers are pursuing a number of strategies to
    meet this rapidly increasing demand. Unlike the initial
    transition to broadband, which only required reconditioning
    existing cable and telephone technologies, the new strategies
    require significantly greater capital investments. Verizon is
    investing $23 billion to make its FiOS system available to
    roughly half of its subscriber base. This system can support
    upload and download speeds of up to 20 MB. AT&T is pursuing a
    different strategy, committing $6.5 billion to deploy its new
    U-verse system based on a telephone-based technology known as
    VDSL to 60% of its service area. These developments have forced
    cable companies to respond, with Comcast investing additional
    billions to upgrade portions of its network to DOCSIS 3.0.
    Thus, technologies now vary widely across providers and even
    across any particular provider's service area.
        But perhaps the most important and most often overlooked
    development is the emergence of wireless as a major broadband
    competitor. The most recent FCC data reveal that wireless has
    skyrocketed from having no subscribers as of the beginning on
    of 2005 to controlling 35 million subscribers and 35% of the
    market for high-speed lines as of June 2007. Published reports
    indicate that wireless broadband has continued to grow rapidly.
        The result is that the broadband industry is becoming
    increasingly competitive. Even network neutrality proponents
    concede that an increase in competition undercuts the
    justification for regulatory intervention.
        The increasing heterogeneity of Internet usage has further
    increased the uncertainty of the business environment. For the
    past several years, the Internet appeared to have been shifting
    from a client-server architecture, in which files are hosted in
    central locations and downloaded to end users, toward a peer-
    to-peer architecture, in which files are stored throughout the
    network. For the past several years, peer-to-peer traffic
    exceeded client-server traffic. Last year, thanks to new
    download-based applications such as YouTube, client-server
    traffic once again regained the upper hand.
        These developments underscore the challenges posed by the
    uncertainty of the technological environment. A network
    designed around a client-server allocates bandwidth
    asymmetrically, with more capacity committed to downloads than
    to uploads. A network designed around a peer-to-peer
    architecture allocates download and upload bandwidth more
    evenly.
        Network providers must thus make decisions that involve
    difficult tradeoffs based on their best guess of what the
    future will bring. These considerations underscore the problems
    associated with any one-size-fits-all solution to the Internet.
    The network now consists of very different transmission
    technologies, each of which is susceptible to different
    problems and different solutions. In addition, the number of
    potential solutions is vast, including building additional
    bandwidth, storing content locally, and network management.
        The difficulty of anticipating which of these solutions
    will prove best in each context is underscored dramatically by
    the AOL-Time Warner merger. When it was announced in 2001, many
    regarded the ``walled garden'' approach in which AOL gave
    preferential treatment to its own propriety content as a
    profound threat to the Internet. These threats never
    materialized, demonstrated most eloquently by Time Warner's
    recent announcement that it was selling off AOL at a loss of
    $200 billion.
        My second point is to draw on the lessons of past efforts
    to implement access mandates similar to network neutrality.
    Past regulatory efforts have found that such interconnection
    and nondiscrimination mandates only work when the interface and
    the product being regulated is relatively simple. As the
    Supreme Court recognized in its Trinko decision, the situation
    is quite different when the interface is complex. When that is
    the case, disputes over access are likely to be ``highly
    technical'' and ``extremely numerous, given the incessant,
    complex, and constantly changing interaction between
    providers.'' \1\ Thus, in order to protect against ``death by a
    thousand cuts,'' any regulator would have to undertake
    comprehensive oversight of essentially all facets of the
    business relationship between the parties. The challenge of
    doing so would be particularly demanding in industries like
    broadband, which are undergoing rapid technological change. \2\
    This has led many commentators to conclude that any attempts to
    mandate access to such complex technologies are likely to prove
    futile. \3\ Indeed, past efforts to impose similar access
    regimes, such the controversy over protocol conversion and
    vertical switching services under the Computer Inquiries,
    leased access to cable television networks, and unbundled
    access to network elements under the 1996 Act, have become
    bogged down in incessant controversies and litigation.
    ---------------------------------------------------------------------------
        \1\ Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP,
    540 U.S. 398, 414 (2004).
        \2\ Christopher S. Yoo, Beyond Network Neutrality, 19 HARV. J.L. &
    TECH. 1, 39-45 (2005), available at http://ssrn.com/abstract=742404;
    Christopher S. Yoo, Network Neutrality and the Economics of Congestion,
    94 GEO. L.J. 1847, 1896-97 (2006), available at http://ssrn.com/
    abstract=825669.
        \3\ See, e.g., Paul L. Joskow & Roger G. Noll, The Bell Doctrine:
    Applications in Telecommunications, Electricity, and Other Network
    Industries, 51 STAN. L. REV. 1249 (1999); Gerald R. Faulhaber, Policy-
    Induced Competition: The Telecommunications Experiments, 15 INFO. ECON.
    & POL'Y 73 (2003).
    ---------------------------------------------------------------------------
        These problems demonstrate the potential dangers of
    regulatory intervention and underscore the importance of making
    sure that the scope of intervention is commensurate with the
    scope of the problem. It bears noting that the OECD, \4\ the
    FCC (on multiple occasions over the past two and one half
    years), \5\ the Justice Department, \6\ the FTC, \7\ and
    leading Internet gurus David Farber and Bob Kahn \8\ have
    concluded that the factual record did not justify the type of
    regulatory intervention that network neutrality proponents
    seek. The FCC's current Notice of Inquiry was haled as an
    opportunity for network neutrality proponents to demonstrate
    the types of harms wrought by the absence of mandated network
    neutrality. \9\ The proceeding only turned up a few isolated
    instances that do not appear to support broadscale regulatory
    intervention. \10\
    ---------------------------------------------------------------------------
        \4\ OECD Report, Internet Traffic Prioritisation: An Overview 5
    (Apr. 6, 2007), available at http://www.oecd.org/dataoecd//43/63/
    38405781.pdf.
        \5\ AT&T Inc and BellSouth Corp Application for Transfer of
    Control, Memorandum Opinion and Order, 22 FCC Rcd 5662, 5724-27 pp.
    116-20 & n 339, 5738-39 pp. 151-53 (2007); Applications for Consent to
    the Assignment and/or Transfer of Control of Licenses, Adelphia
    Communications Corporation, Assignors, to Time Warner Cable Inc,
    Assignees, et al, Memorandum Opinion and Order, 21 FCC Rcd 8203, 8296-
    99 pp. 217-23 (2006); Verizon Communications, Inc and MCI, Inc
    Applications for Approval of Transfer of Control, Memorandum Opinion
    and Order, 20 FCC Rcd 18433, 18507-09 pp. 139-43 (2005); SBC
    Communications, Inc and AT&T Corp Applications for Approval of Transfer
    of Control, Memorandum Opinion and Order, 20 FCC Rcd 18290, 18366-68
    pp. 140-44 (2005); Appropriate Framework for Broadband Access to the
    Internet over Wireline Facilities, Report and Order and Notice of
    Proposed Rulemaking, 20 FCC Rcd 14853, 14904 p. 96 (2005).
        \6\ Ex parte Filing of the Department of Justice, Broadband
    Industry Practices Before the FCC, WC Docket No. 07-52 (filed Sept. 6,
    2007), available at http://www.usdoj.gov/atr/public/comments/
    225767.pdf.
        \7\ Federal Trade Commission, Staff Report on Broadband
    Connectivity Competition Policy 10, 11 (June 2007), available at http:/
    /www.ftc.gov/reports/broadband/v070000report.pdf.
        \8\ David Farber & Michael Katz, Hold Off on Net Neutrality,
    WASHINGTON POST, January 19, 2007, at A19; Andrew Orlowski, Father of
    Internet Warns Against Net Neutrality, THE REGISTER, Jan. 18, 2007,
    available at http://www.theregister.co.uk/2007/01/18/kahn--net--
    neutrality--warning/ (quoting co-developer of TCP/IP Robert Kahn).
        \9\ Broadband Industry Practices, Notice of Inquiry, 22 FCC Rcd
    7894 (2007).
        \10\ See Kara Rowland, FCC Set for Airwaves Auction, WASH. TIMES,
    Jan. 16, 2008, at C8 (quoting FCC Chairman Kevin Martin as calling
    network neutrality regulation unnecessary).
    ---------------------------------------------------------------------------
        On the other hand, the Internet has a long history of
    adjusting to these types of problems by itself. Indeed, many
    examples to which network neutrality proponents point, such as
    network providers' initial resistance to virtual private
    networks (VPNs) and home networking equipment such as WiFi
    routers, are better regarded examples of how the private
    decisions of consumers and network providers can solve such
    problems without regulatory intervention. Comcast's recent
    accommodation of BitTorrent and Pando and Verizon's recent
    commitment to open networks represent more recent examples of
    the same phenomenon.
        The better solution is to pursue what I have called
    ``network diversity,'' in which different providers are
    permitted to experiment with different approaches and to let
    the choices of consumers control the ultimate outcome. \11\ A
    case-by-case, after-the-fact approach would appear to strike a
    better would balance that preserves room for experimentation
    while simultaneously ensuring that any problems that may emerge
    will be addressed. The FCC's enforcement action against Madison
    River \12\ and Chairman Kevin Martin's recent testimony before
    the Senate Commerce Committee \13\attest to the agency's
    readiness to play this role.
    ---------------------------------------------------------------------------
        \11\ Yoo, Beyond Network Neutrality, supra note 2; Network
    Neutrality and the Economics of Congestion, supra note 2; Christopher
    S. Yoo, Would Mandating Broadband Network Neutrality Help or Hurt
    Competition? A Comment on the End-to-End Debate, 3 J. ON TELECOMM. &
    HIGH TECH. L. 23 (2004), available at http://ssrn.com/abstract=495502.
        \12\ Madison River Commc'ns, LLC, Order, 20 FCC Rcd 4295 (2005).
        \13\ Written Statement of Kevin Martin, Chairman, Federal
    Communications Commission, Before the United States Senate Committee on
    Commerce, Science and Transportation 4-5 (Apr. 22, 2008), available at
    http:// hraunfoss.fcc.gov/edocs--public/attachmatch/DOC-281690A1.pdf.
    ---------------------------------------------------------------------------
                                  ----------

        Mr. Markey. Thank you, Mr. Yoo, very much. And our final
    witness is Mr. Ben Scott. He is the policy director for Free
    Press. He testifies today on behalf of Free Press, Consumers
    Union, Public Knowledge, and the Consumer Federal of America.
    We welcome you back, Mr. Scott.

          STATEMENT OF BEN SCOTT, POLICY DIRECTOR, FREE PRESS

        Mr. Scott. Good morning, Mr. Chairman, members of the
    committee. I much appreciate the opportunity to testify today.
    As many of you know, for years the preservation of network
    neutrality has been a prior issue for consumer groups like
    mine. That is because the consumer experience with the future
    of the Internet rides on this policy decision.
        As you have heard today, two competing visions for that
    future stand before you. Will we embrace the openness that has
    shaped the Internet to the present day, or should we permit
    network owners to move to a closed system of content control,
    which we have had in cable television? It is a virtual clash of
    civilizations.
        For consumers, this clash is about the rights of Internet
    users to seek and share the content of their choice online. Of
    course, net neutrality has been hotly debated by legions of
    lobbyists and millions of Americans. But in the last 3 years,
    Republicans and Democrats here in the Congress and at the FCC
    have actually come together on a few basic points. I have
    analyzed this history in my written testimony.
        First, almost everyone agrees that consumers are entitled
    to access the lawful content applications and devices of their
    choice, and second that it is reasonable to establish these as
    principles in the law. FCC put this in a policy statement, and
    Congress has tried to codify it in numerous ways over the
    years.
        This leads me to conclude that it is no longer a question
    of whether consumers will have laws guarding an open Internet
    but how those laws will be crafted. We strongly support this
    bill for rising to the occasion. This bill simply places these
    agreed-upon consumer rights at the base of the Communications
    Act. It clarifies the authority of the FCC to protect Internet
    users from discrimination, and it tells the agency what rights
    Congress wants consumers to expect in an open Internet
    marketplace.
        It is a modernization of the principles that have long been
    in the Act. There are no regulations in this bill, simple and
    clear. However as we have heard today, this debate if often
    muddied by issues that are legitimate but not germane to the
    bill. I have a few fish for your aquarium, Mr. Chairman.
        First, as you mentioned, the copyright issue. Net
    neutrality does not protect online piracy on peer-to-peer
    networks or anywhere else on the Internet. Neither this bill
    nor any bill in the history of this debate would have protected
    illegal activity. Not piracy, not child pornography, not spam,
    not viruses, none of it.
        Second fish: misconceptions about peer-to-peer users. A
    small percentage of peer-to-peer users have been vilified as
    bandwidth hogs that force network owners to block consumer
    choice. Frankly, I have never heard of an industry complaining
    so loudly about people so eager to use their products. And
    sure, of course, networks should be able to manage traffic by
    heavy users, but that doesn't provide an excuse for blocking
    every user from running a particular program.
        It is important to point out that p-to-p services do not
    use more bandwidth than consumers have already paid for, and
    they have paid hefty monthly bills. The Wall Street Journal
    reports that Comcast earned an 80 percent profit on its cable
    modem service. I would like a business like that myself.
    Actually lots of p-to-p programs are totally legitimate. They
    are used by ABC.com, PBS, and NASA to name a few. But probably
    the best example is Skype, a p-to-p program that allows
    Internet users to have voice conversations online with so
    little bandwidth that it works on a dialup connection. Today it
    has over 300 million users in 28 different languages. This is
    the kind of popular innovation that this bill is designed to
    promote.
        Now, the consequences of ignoring this bill are sharpening
    in clarity. There is an urgency here. Network neutrality was
    supposedly a solution in search of a problem, and yet over the
    last 2 years, the problems keep bubbling up. Right now, Comcast
    is under investigation at the FCC for blocking Internet
    applications. This, I suggest to you, is a bellwether case. FCC
    Chairman Kevin Martin has said he will enforce his network
    neutrality principles. The cable industry says that although
    they have always supported the FCC's principles, they reject
    the FCC's authority to enforce them. In other words, they were
    for net neutrality before they were against it.
        The Comcast case may well end up in court where the market
    will endure more years of uncertainty. It would be far better
    if Congress passed this bill and settled the question. Make no
    mistake, this is a compromise bill. It is reasonably by almost
    any standard. I would prefer something stronger, but I think
    this bill represents a significant step in the right direction.
        What amazes me is that it has not attracted broader
    support. The middle ground that opponents of net neutrality
    have called for is right here in this bill, and now they appear
    unwilling to stand on it.
        Internet policymaking is premised on a simple idea: we will
    remove regulations from network operators, but we will draw a
    line to protect consumers in the access to an open Internet.
    Today we test this theory. A duopoly market of phone and cable
    companies will not discipline itself. This is a clear moment
    for Congress to act and pass The Internet Freedom and
    Preservation Act. The future of the Internet for everyone
    depends upon it. I thank you for your time, and I look forward
    to your questions.
        [The prepared statement of Mr. Scott follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Markey. Thank you, Mr. Scott, very much. And now the
    chair will turn to recognize himself for a round of questions.
    And I will just begin by noting that 2 years ago this
    subcommittee voted for Mr. Barton's COPE bill, then the
    Republican chairman of this committee, which codified the FCC's
    net neutrality principles by authorizing the FCC to enforce
    them. The legislation Mr. Pickering and I offer similarly
    codifies overarching principles and then tasks the FCC to
    conduct an examination to access what is happening in the
    marketplace, to conduct field hearings, and to report back to
    Congress.
        This process will permit the FCC to see whether the
    principles can be fulfilled through competition, through
    regulation, or through case-by-case enforcement. But the notion
    that codifying principles is the same as establishing
    regulations is no more true here than it was when the Barton
    bill authorized enforcement of the FCC principles 2 years ago.
        So let me begin with you, Mr. Scott. Let us talk about
    network management and how reasonable management can be
    employed. Your concern is that if network management
    effectively trumps the Internet freedom, something very
    valuable about the Internet is lost in that management process
    as opposed to legitimate management that the large companies
    can engage in. Please explain.
        Mr. Scott. Well, let me start by saying that we are not
    opposed to network management. I don't think anyone on the pro
    net neutrality side is opposed to network management. Network
    management has happened for years. It happens every day in
    every network.
        What is different about this particular case that is before
    the FCC is network management that selects a particular piece
    of content or application and chooses to block or degrade that
    particular piece of content irrespective of the time of day,
    irrespective of the size of the file, irrespective of whether
    that user is a heavy user or a light user. That is the kind of
    targeting and the kind selectivity and the kind of choice
    making by the network operator that we think should be left
    with the consumer.
        Mr. Markey. OK, great. Mr. Savitz, do you agree with that
    analysis?
        Mr. Savitz. I would agree with it 100 percent. I mean I
    think the whole--exactly as Mr. Scott said. We don't--I don't
    disagree whatsoever with blocking unlawful content. I don't--we
    don't disagree at all with managing capacity. It would just be
    anything that sort of discriminates against origin source or
    destination and makes it sort of an unequal playing field that
    doesn't allow somebody to create a business like we were able
    to create. That is what would bother us.
        Mr. Markey. OK, Mr. Peterman, do you agree with that
    analysis?
        Mr. Peterman. Yes, absolutely.
        Mr. Markey. OK, Ms. Combs?
        Ms. Combs. Yes, I do.
        Mr. Markey. Yes, you do. And Mr. Bainwol?
        Mr. Bainwol. I am reflecting.
        Mr. Markey. OK.
        Mr. Bainwol. I am a reflexive kind of guy.
        Mr. Markey. I will come back to you. Mr. McSlarrow, in your
    testimony, you support the fair and open assessment of the FCC
    of network providers, and you acknowledge that the approach
    differs from other proposals that prescribed regulatory
    outcomes. And I thank you for noting the distinction.
        Mr. Bainwol, you and Mr. McSlarrow both highlight that the
    Internet freedom principles only are accorded to consumers and
    entrepreneurs for lawful content, and I want to thank you both
    for seeing that in the bill and for saying that in your
    testimony.
        Mr. Peterman, you also have an interest in fighting piracy.
    If you could, please give us your take on how support for
    network neutrality and fighting piracy are not mutually
    exclusive principles and why it is essential to your industry
    that piracy is fought vigorously and that this legislation
    would not inhibit that at all.
        Mr. Peterman. Absolutely. We have examples. Last year, the
    nature of our show is we produce our episodes, and then the
    Disney Channels holds those episodes for a lot of the season,
    unlike adult programming where you generally have a new episode
    every week. As many of you who have kids know, your children
    have an amazing ability to watch the same show over and over
    and over. This is wonderful for me, and it is wonderful for
    Disney because it means that the same number of episodes that
    could last in a much shorter amount of time can be extended
    over a whole season.
        We had a stockpile of episodes that had not aired yet, and
    somehow some of those episodes, the discs that contained those
    episodes made their way to private citizens. And those
    episodes, before they were on the air, were on YouTube. We are
    very opposed to piracy. What we are fighting for is the ability
    to own and control our content, and obviously piracy works
    directly against that. But we believe that this bill does not
    in any way inhibit the attempt to stop piracy. And we believe
    that innovation will continue to find alternative ways to
    protect copyrights.
        Mr. Markey. Thank you, Mr. Peterman. My time has expired.
    The chair recognizes the gentleman from Florida, Mr. Stearns.
        Mr. Stearns. Thank you, Mr. Chairman. You mentioned the
    Barton bill 2 years ago that we passed. That bill was called
    the COPE Act. I just would probably point out that it only gave
    the FCC authority to enforce the four principles that were in
    the bill. It did not authorize a rulemaking. This bill not only
    authorized a rulemaking, it goes further and beyond the four
    FCC principles. And so, Mr. Chairman, if it turns out that you
    are supporting the COPE Bill, we would be very happy to move
    the entire COPE Bill in this Congress with you as a chairman.
        That being said, Mr. Chairman, I ask unanimous consent to
    put into the record an editorial by the Wall Street Journal,
    April 12, entitled ``An Alternative to Network Neutrality.''
        Mr. Markey. If that is the editorial attacking me by the
    Wall Street Journal editorial page--yes, it is. With great
    pride, I ask unanimous consent that it be placed in the record.
    I think on that day they actually had two editorials attacking
    me, the Wall Street Journal editorial page.
        [The information appears at the the conclusion of the
    hearing.]
        Mr. Stearns. OK. Well, thanks for your magnanimous support
    here. I also ask unanimous consent, the two letters from
    various groups be included with the record from the American
    Conservative Union, the National Taxpayers Union, Freedom
    Works, Citizens Against Government Waste, and Americans for Tax
    Reform, if I could, Mr. Chairman.
        Mr. Markey. Without objection.
        [The information appears at the the conclusion of the
    hearing.]
        Mr. Stearns. And I would say to Ms. Combs that we have that
    is going into the record is a letter talking about network
    management is critical to stop pornographers and pedophiles
    from having unfettered access to consumers' Internet
    connection, and this is signed by Gary Bower, the president of
    American Values; David Keen, of course, the president of the
    American Conservative Union; also the Catholic Family and Human
    Rights Austin Ruse; the Catholicvote.org; Traditional Family
    and Property, Mr. Preston Knoll; and then Derek Hunter, Media
    Freedom Project. So there obviously are some disagreements
    here.
        They feel that network management is important. When you
    look at this debate and the difficulty understanding what net
    neutrality means, but I think after listening to Mr. Scott and
    others here, Mr. Peterman, that network management is fully
    understood. I am reminded of the Supreme Court's decision that
    in a theater, you don't have freedom of speech. You can't yell
    fire. So there is a sense of network management even with
    freedom of speech.
        And so Ms. Combs mentioned that Comcast would not allow the
    downloading of the King James Version Bible. You know obviously
    if you were in a situation where your business and somebody was
    downloading peer-to-peer telemedicine, some x-rays, and some
    critical things that were needed for doctors for cancer
    research on a patient, you would have to make that decision if
    somebody was downloading Herodotus' 13 volumes of history. Or
    in this case, you can get a free copy of the King James Bible
    in any hotel, motel room in the country. And they might have to
    make this network decision just like in a theater--a person is
    network managed not to yell fire when there is no fire.
        So my question is for Mr. McSlarrow. Isn't network
    management just simply like putting up a yield sign at an
    intersection? Periodically, we know as we come across the 14th
    Street Bridge, you know how much traffic there is, and
    sometimes one lane works over into another. But traffic in one
    direction--if you have all this traffic, don't you have to make
    a decision for network management? And you might answer the
    Christian Coalition's concern about this King James Version in
    which she said that it was discriminated against.
        Mr. McSlarrow. I mean--it is interesting in the same way, I
    guess, everybody has decided we are against illegal content
    being distributed, everybody says they are for network
    management. And then here we have a case, as was mentioned
    before, where you had essentially an artificial test of whether
    or not you could upload a King James Bible from one computer to
    another as if, and apparently they didn't, they didn't
    understand that peer-to-peer networks are by definition many
    multiple sessions across hundreds, even thousands or tens of
    thousands of PCs around the country or even the world.
        The test was designed for failure. All you had to do was
    put the King James Bible on any Web hosting service that you
    get with any broadband provider service, and you can stream it.
    You could do it today. So the point is no one was blocking a
    particular content. That is absurd.
        There is a legitimate issue that at times of peak
    congestion, and different operators--and it is hard for me to
    get into a specific company's case. Different operators do it
    differently. But in general, at times of peak congestion, they
    will manage the traffic. The vast majority of that traffic is
    going to be peer-to-peer, and it is not irrelevant that the
    vast majority of the peer-to-peer traffic will in fact be
    pirated content. So it is, in my view, a reasonable method of
    not just managing the traffic but more importantly ensuring
    that all the other consumers you are serving get a superior
    experience perhaps to delay imperceptively some of the uploads.
    We are not even talking about downloads. But the real point
    here is I am not going to hang my hat on saying that the way
    someone does it today is absolutely, 100 percent the best way.
    The real point is the private sector is actually working
    together to see if we can do all of these things better.
        Mr. Stearns. OK. In the Wall Street Journal, in your
    article, the government's role here, as far as I understood it,
    is not to tell--but rather, to make sure consumers have
    alternatives to--now, to handle this, what we talk about here,
    from here to here, don't you think there is a possibility
    that--staggering rate of information that is effective to the
    broadband?
        Mr. Scott. Here is how I think it should work. You can
    address people who are using high bandwidth by reducing the
    speed on that connection in a uniform basis agnostic to what is
    coming out of that connection, whether they are downloading a
    YouTube video or downloading peer-to-peer.
        What is interesting about this particular case is that it
    was directed at a particular application regardless of whether
    that application was being used for a large file or a small
    file. Regardless of whether that user was a heavy bandwidth
    user or a light bandwidth user. That is the kind of network
    management, the specific targeting, that we are talking about
    that is inappropriate.
        Mr. Doyle [presiding]. The gentleman's time has expired.
    The chair now recognizes himself for 5 minutes. I would just
    say to my friends that say that this bill promulgates rules.
    You know my reading of the bill doesn't say anything about
    promulgating rules. It is a proceeding to conduct an
    assessment, conduct field hearings, and issue a report to
    Congress within 90 days. I mean, the FCC can do a rulemaking
    any time it chooses. It doesn't need Congress to do a
    rulemaking. So I don't know where that comes from.
        Mr. McSlarrow, I want to talk--and maybe Mr. McCormick
    too--a little bit about the bandwidth hogs for a moment. These
    are people who really like your service and use a lot of it.
    And I understand Comcast has an acceptable use policy which
    allows the company to cut off service to customers who use the
    Internet too much. Now, they say that it is just \1/100\ of a
    percent of their 11.5 million residential high speed Internet
    customers that fall into this category.
        So if there is that tiny number that are bandwidth hogs,
    why would a broadband provider use a method that limits access
    to 100 percent of its customers regardless how much bandwidth
    they are using or how little bandwidth they are using? Maybe
    Mr. McSlarrow first, and you could comment, Mr. McCormick.
        Mr. McSlarrow. Thank you. The answer is they wouldn't. We
    should be very clear here. All of these applications, whether
    it is BitTorrent, e-docking, intelli, or others, are
    applications that are used by our customers. There are cases at
    times of peak congestion where some of that traffic and the
    upstream, in order to ensure that the other customers aren't
    slowed down, might be delayed. But they can still use the
    service. And in most cases, it won't even be noticeable to
    them.
        I think the point you raised is a perfectly valid one.
    There are different ways of trying to manage traffic. One could
    be just to focus on the individual user, and indeed Comcast has
    announced that they are going to move to a protocol agnostic
    network management system.
        But I think it is still the case that even if you do that,
    you haven't actually solved the problem of peak congestion, and
    it is really that--I think when you talk to the engineers, it
    is that problem that is the most challenging one. And I am
    certainly no engineer, I really--the point here is that the
    engineers are experimenting today and ought to be trying to
    figure this out.
        Mr. Doyle. Mr. McSlarrow, I understand though that the
    founder of--the MIT professor David Reed and others at the
    Boston field hearing say that their tests show that Comcast
    engage in these practices all of the time, not just during
    certain times. Now, do you have any new evidence to that point?
        Mr. McSlarrow. No, I am just repeating what has been stated
    publicly by Comcast.
        Mr. Doyle. Let me ask another question. I want to talk
    about the peer-to-peer because it seems that a number of
    panelists here--Mr. Bainwol, Mr. McSlarrow, Mr. McCormick, Mr.
    Yoo--you are each seeking broad authority to manage network
    traffic the way you see fit. And in a recent instance, we saw
    managing and limiting a particular kind of traffic: peer-to-
    peer. So this is just a simple question. How much of the
    traffic on the Internet is peer-to-peer file sharing? Maybe
    start with Mr. Yoo. Percentage wise.
        Mr. Yoo. Published estimates vary, but many are on the
    order of 80 to 90 percent.
        Mr. Doyle. Eighty to 90 percent?
        Mr. Yoo. At peak times, which are the key times.
        Mr. Doyle. Yes, how about you, Mr. McCormick?
        Mr. McCormick. I know as a rule of thumb, about 20 percent
    of users utilize about 80 percent of the Internet.
        Mr. Doyle. You are saying 80 percent, and you are saying 20
    percent?
        Mr. McCormick. Twenty percent of users.
        Mr. Doyle. So you are saying 20 percent of total Internet
    use is peer-to-peer file sharing?
        Mr. McCormick. No.
        Mr. Doyle. Eighty percent?
        Mr. McCormick. We have to provide that to you----
        Mr. Doyle. I see. Mr. Bainwol.
        Mr. Bainwol. I have seen reports anywhere from 60 to 80
    percent, but let me make one other point here. We do not
    believe that there should be an effort to go protocol-specific
    in terms of network management. So we would not suggest that
    that approach should be taken. But it is also important to note
    that when you look at a program or a protocol like LimeWire, I
    have seen a study where 98 percent of the searches on LimeWire
    are for pirated material, OK, are for copyrighted material, 98
    percent. I mean, that is profound. And of the files that are
    available to be searched, it is something like 92 percent. So
    while we shouldn't be protocol specific in terms of our
    approach with network management, we should also understand in
    a pragmatic way that there are certain protocols that are
    particularly troublesome in terms of piracy.
        Mr. Doyle. Well, I think the point that I want to make is,
    Mr. McCormick, at your trade show last year, a company called
    Elacoil released a study that said that HTTP is approximately
    46 percent of all traffic on the network and that peer-to-peer
    continues a strong second place at about 37 percent of local
    traffic. We saw an old study from Sprint, 2005, and I grant you
    that is very old data, that said less than 6 percent with
    regular Web traffic clocking in at more than 50 percent of the
    flow.
        But I think it is important that when people say that a
    kind of Internet traffic is choking the network and that
    traffic happens to present a competitive threat to the ISP for
    other services, I think policymakers deserve to know how much
    choking is really going on. And it seems to me that when we are
    looking at--we are talking about this peer-to-peer file sharing
    as the big culprit, it is not the majority at least from the
    most recent studies we have seen that is causing the choking.
        I see that I have gone past my time, so I will enforce my
    rules and cut myself off and yield the floor to my good friend,
    Mr. Pickering, for 5 minutes.
        Mr. Pickering. Mr. Chairman, thank you. I am going to ask a
    few questions, but I am also going to try to make a case for
    the legislation and why it is the reasonable middle ground and
    why, from a Republican point of view, it is the best ground on
    which to stand. As Mr. Yoo talked about, the emerging
    marketplace and technologies, I happen to agree with him that
    regulation of the Internet and an open access or common carrier
    would be way too complex. And to get into that type of granular
    regulation would be litigious and would create mass uncertainty
    in the marketplace.
        I do believe, however, a case-by-case approach, as Mr. Yoo
    outlined, is the right way to do this, and it is working today.
    And it is keeping us from having problems. When problems arise,
    they are knocked down pretty quickly. So the case-by-case where
    there is a dispute over whether the FCC has the authority on a
    case-by-case basis to enforce network neutrality principles
    adopted by Republican commissions.
        And so to clarify that and to give us the authority on a
    case-by-case basis and to maintain the openness and the
    principles of network neutrality, this legislation is needed.
    And this legislation is not different from the COPE Act in any
    substantive form. In some ways but not of any significance.
        It calls for a comment and hearings around the country so
    that we have the accountability, the transparency, and the
    democracy around the greatest freedom that we have known
    economically and technologically of this century, the Internet,
    and the openness that we have had. And so this bill is the
    right way to do a case-by-case, clarify the authority, and
    maintain a discussion over what type of business models we are
    going to see in the future.
        However, I disagree with Mr. Yoo that to allow different
    business models to be adopted would be a good thing, and this
    is why. And this is my question. Mr. Savitz, let us say one of
    the bell companies or one of the cable companies would strike
    an exclusive deal with the Bigfoot Shoe Company and they were
    to say, we will give preferential or exclusive access on our
    networks to the Bigfoot Shoe Company. What would that do to
    small businesses like you?
        Mr. Savitz. It would be amazingly hurtful. I mean, right
    now we would be the Bigfoot that would be buying it, and I
    don't even want us to do it because it would just stifle the
    next guy and all the terrific entrepreneurial and innovation.
    When we started Shoebuy, that was during the crazy capital
    markets funding. People took a ridiculous amount of money.
        We had a competitor out there, boot.com, I remember. They
    were spending money any way they could. It was a terrible
    consumer experience, but they went through $150 million in
    cash. They would have easily, no question, spent $3 million, $4
    million, $5 million to buy preferential slotting treatment.
    Consumers would have had a terrible experience. They probably
    would have thought buying shoes online didn't work. So no
    question we think that that would be terrible for innovation
    and----
        Mr. Pickering. And if we replicated that across every
    sector of commerce on the Internet, how destructive would that
    be to what has been the most successful model of innovation,
    entrepreneurship, investment, expansion of business
    exponentially over the last 10 years if we went to a Wal-Mart
    model on the Internet--if that is a fair comparison--that you
    can only shop in one place. You get the----
        Mr. Savitz. Gut-wrenching. I wouldn't be here today. I
    would move on, and I have already done my gig. But I think the
    Internet is just--I am very passionate about it because it has
    been an amazing open platform that we have seen a lot of
    incredible things. You know, you listen to Mr. Peterman. He
    finds ways to communicate with this incredible base of very
    passionate Hannah Montana fans through the use of the Internet.
        Instead of looking at it as an obstacle, the people that
    are very innovative, that are very passionate about their
    consumer and the consumer experience and communication are
    finding ways to do terrific things.
        Mr. Pickering. The other thing that I wanted to bring out
    in the bill that why I believe it is a better bill from current
    policy for the network operators is that for the first time,
    the legislation addresses the issue of network management and
    clarifies that reasonable network management is allowable.
    Today we do not have that in law, and, Mr. McSlarrow, I know
    that as you look and, Mr. McCormick, as your companies look, at
    network management, it is a real issue. It is a legitimate
    issue.
        And so this bill allows for the reasonable network
    management practices, and I see in the private sector, the
    industry-led groups, the voluntary groups of network
    management, standards and practices, best practices, that is
    exactly what this bill is intended to encourage so that there
    is not government regulation or intervention.
        And, Mr. McSlarrow, would you say that the legislation
    does, for the first time, help on the issue of network
    management? And if not, do we need to do something more in the
    bill to give you greater comfort and certainty that network
    management practices and private sector initiatives that you
    are now doing are encouraged?
        Mr. McSlarrow. Well, I would be comforted if you struck
    everything before the study, but I am guessing that is not on
    the agenda. I mean, yes, I take the point we have an exception
    for reasonable network management, and yet the very fact that
    we just had this exchange and that we have had this debate
    about whether or not our ability to manage peer-to-peer traffic
    is being called into question tells me everything I need to
    know. With the best of intentions, it is a phrase. It is just
    going to be subject to litigation and people going to the FCC
    or here, and in the absence of a definable, real, and present
    problem, I don't know why we would go down that path.
        Mr. Pickering. Mr. Chairman, I will yield back. I don't
    know if we will have a second round. But, Mr. McSlarrow, if you
    do have any suggestions on network management, I do appreciate
    what you are doing on network management, clarifying the
    private sector practices.
        Mr. Markey. Thank the gentleman. Chair now recognizes the
    gentleman from Texas, Mr. Gonzalez, for 8 minutes.
        Mr. Gonzalez. Thank you very much, Mr. Chairman. And I am
    glad Mr. Pickering used the example of an exclusive
    relationship that may well endanger an enterprise such as Mr.
    Savitz's because I actually see a greater threat elsewhere
    developing, and I want to get into that. And it is about
    management and such.
        I don't think this piece of legislation is necessary. It is
    premature. If this committee does its work, if the FCC does its
    work, why would we need to do something by way of legislative
    mandate which takes it out of our hands and our oversight
    duties? And I don't think that is really necessary.
        This whole argument has been couched in terms of access,
    openness, little guy, little consumer, Internet user, the
    blogger, the small businessman. I don't think that is what it
    is about at all. It really is about the big guys in this fight.
    And I am going to go and I will ask Mr. Savitz: is your concern
    access to the Internet, or should your concern really be where
    you are positioned when someone conducts a search and hits
    ``shoes''? I think that should really be your predominant
    concern.
        And what I will do now, because I am going to read from
    ``The Search'' by John Battelle, which is probably 3 years old.
    Many of you probably have already read it, but it is very
    instructive. And I will read from it now. Neil Moncrief
    couldn't afford to have a bad quarter. In fact, even a bad
    month made things a bit tense at home. Running your own
    business is like that. When things go south at the office, you
    take it home with you. As a small businessman, Moncrief lived
    on the edge of profit and loss. A bad month means avoiding his
    local banker, putting off home and car payments, and having
    less meat on his family's table. But Moncrief is proud of what
    he has achieved. He built a small e-commerce company. I think
    it was toobigshoes.com. Survived the nuclear winter of 2001,
    2002 and emerged with enough cash flow to take care of his
    family. Moncrief has search engines to thank for that cash
    flow, Google in particular. Thanks to the traffic that Google
    drove to Moncrief's online storefront, Moncrief no longer
    worked for ``The Man.'' Moncrief is one of tens of thousands of
    merchants who have taken to the Web since the Internet became a
    global phenomenon. For every household brand built during the
    bubble's infamous glory, EBay, Amazon, Expedia, thousands of
    Neil Moncriefs toiled in relative obscurity, building the Web's
    bike shops and insurance agencies and its button merchants and
    stroller stores. These digital cousins of strip mall America
    are the very beating heart of the United States economy. Small
    business writ large across cyberspace.
        Do you think Amazon has got scale? Do you think EBay is
    huge? Mere drops in the bucket. Amazon's 2000 revenues were
    around $2.76 billion, but the Neil Moncriefs of the world taken
    together drove more than $25 billion across the net that same
    year according to U.S. government figures. That is the power of
    the Internet. It is a beast with a very, very long tail. The
    head, EBay, Amazon, Yahoo, may get all the attention, but the
    real story is in the tail. That is where Moncrief lives.
        But while the Web may offer access to hundreds of millions
    of customers, you still have to let them know you exist. When
    folks went looking for something, they usually started at a
    search engine, and through some combination of luck, good
    karma, and what seemed like fair play, when folks punched ``big
    feet'' or similar key words into Google, Neil's site came up
    first.
        The best part, Moncrief had never purchased an
    advertisement. All those search engine referrals were organic.
    We were the right answer for the search, so why buy an ad? In
    the third week of November 2003 to be precise, the phones
    stopped ringing. The orders stopped coming in. For 2 weeks,
    Neil Moncrief didn't know what hit him, but he began to wonder
    maybe Google was broken. The very thought seemed ludicrous.
    Google broken? But a quick search on Google confirmed his
    suspicion. Twobigfeet.com was no longer the first result for
    ``big feet'' on Google. In fact, it wasn't even in the first
    100 results.
        In short, Google had tweaked its search engine algorithms,
    something the company does quite frequently. But this time
    Google's modifications, which were intended to foil search
    engine spammers, had somehow sideswiped Moncrief's site as
    well. What Google giveth, Moncrief learned the hard way, Google
    can also take away.
        It was then that Moncrief realized that while he may have
    stopped working for the man, he was now working for a far more
    capricious overlord who had no idea he even existed.
        In short, Google had updated its indexes to penalize what
    the company viewed as spam, people gaming their sites so they
    ranked higher. And lots of folks, including Neil, were caught
    in the crossfire. Neil was an unfortunate casualty of a much
    larger war, an arms race of sorts fought over relevance, power,
    and money. And I am not complaining about Google doing that. It
    is just that I believe they had to manage their own service
    product and network. Google will have to determine though, if
    you think of their role, what should come first when someone is
    looking for, for instance, hip-hop. Who gets first in such a
    system? Who gets the traffic, the business, the profits? How do
    you determine all the possibility, who wins and who loses?
        But Google, more likely than not, will attempt to come up
    with a clever technological solution that attempts to determine
    the most objective answer for any given term, and I think that
    is admirable. Perhaps the ranking will be based on some sort of
    page rank, downloading statistics, and lord knows what else.
    But one thing for sure, Google will never tell you how they
    arrive at that.
        Now, that is not such a bad thing. And I know it is going
    to take my whole 8 minutes, but I learned from Mr. Markey never
    ask a question that does not include the answer. The real
    problem comes in when Google then starts entering certain
    relationships with other individuals and that advertising is
    then tied to search engines. And that leads me, of course, to
    probably the latest article that I saw with Yahoo and Google,
    which is very interesting. It says ``Yahoo Incorporated''--this
    is from May 2, Wall Street Journal. ``Yahoo Incorporated could
    announce an agreement to carry search advertisements from
    Google Incorporated within the week. While a broad search ad
    pack would likely attract intense anti-trust scrutiny, the
    oppositions Google and Yahoo are discussing include a non-
    exclusive arrangement. In other words, how do you get around
    the scrutiny of antitrust and such? I don't know what this
    would be. The basis of such an arrangement would be a real-time
    option system that would choose the most lucrative ads for any
    given consumer query.''
        Lucrative. I am not real sure what they mean by that, and I
    think they are going to expand, but wouldn't you be concerned,
    as a small businessman just starting out, where is your
    placement? It is not going to happen with organic search, is
    it? You are going to have to subscribe to some sort of ad
    service, most probably provided by Yahoo and Google, which
    comprise about 72 to 73 percent of all searches in the United
    States, which are directly tied in to whatever ad product. Do
    you feel that that should be a real concern?
        And maybe while we are addressing the five principles of
    the Internet and the architecture, maybe we ought to also be
    addressing the openness, accessibility, and the freedom of how
    it operates when it comes to search engines and what is truly
    driving and financing the Internet, and that is advertisement
    revenues.
        Mr. Markey. The gentleman's time has expired, but the
    witness can answer the question.
        Mr. Savitz. I will tell you that for individuals like the
    one that you described that does not or cannot afford to do a
    lot of advertising, they are going to have to really rely on
    blogs and small individual entrepreneurial shopping sites and
    other things to get their word out. And my fear, what worries
    me and why I am here today, is that we have things like
    slotting fees and other things. Those very people that they
    would have to rely on as an individual to get the word out will
    be regulated to the slow lane.
        Mr. Markey. All right, the gentleman's time has expired.
    The chair recognizes the gentleman from Illinois, Mr. Shimkus.
        Mr. Shimkus. Thank you, Mr. Chairman. Nice job downstairs.
    I always wonder when we agree who is messing up, who is wrong.
        Mr. Markey. We are going to start the gentleman over again.
    Just so everyone understands what is going on, because it is
    hard for people to understand the way the committee is
    organized. Downstairs simultaneously this committee has
    jurisdiction over Energy and over Telecommunications, and it is
    broken into two separate subcommittees. So right below this
    hearing right now, there is another hearing going on on the
    impact that biofuels, corn-based biofuels, being put into
    gasoline tanks, is having on the price of food and any impact
    on the environment. So about half of the members of this
    subcommittee are also members of that subcommittee. So the
    members are running back and forth between the two
    subcommittees as the hearings are transpiring.
        And while Mr. Shimkus do not agree on the issue before this
    hearing on net neutrality, we do agree upon the issue of
    biofuels and how that issue should be handled. And so that is
    what he is referring to so that everyone can understand because
    there has been about eight members who have made reference to
    the other hearing.
        With that, the gentleman is recognized for 5 minutes for
    his questions.
        Mr. Shimkus. Thank you, Mr. Chairman. I also want to kind
    of clear up--my colleague, Mr. Pickering, mentioned in his
    questioning that current law does not allow network management.
    But that is not the case. And I would like to quote a policy
    statement from the FCC where they state, ``Accordingly, we are
    not adopting rules in this policy statement. The principles we
    adopt are subject to reasonable network management.'' So just
    to get that on the record.
        Mr. Pickering. Would the gentleman yield?
        Mr. Shimkus. Sure.
        Mr. Pickering. Is that in policy, or is that in statute?
        Mr. Shimkus. That is a policy statement by the FCC.
        Mr. Pickering. Does the policy have----
        Mr. Shimkus. Dated----
        Mr. Pickering. Will the gentleman yield?
        Mr. Shimkus [continuing]. September 23, 2005.
        Mr. Pickering. Does the policy have the same----
        Mr. Shimkus. Are you going to give me some of your time?
        Mr. Pickering. Yes.
        Mr. Shimkus. Are you filibustering me, Mr. Pickering? I am
    reclaiming my time. Mr. McCormick, why is it so important that
    broadband providers be able to manage their networks and
    prioritize Internet traffic in the absence of government
    regulation?
        Mr. McCormick. Mr. Shimkus, various applications have
    different requirements. Some applications are ordinarily
    sensitive to latency, for example, VoIP is sensitive. We had a
    situation where video screening on this--certain healthcare
    applications. This legislation says that it would adopt and
    enforce protections to guard against any unwritten
    discriminatory favoritism by network offers based on scores for
    tests. Massachusetts General Hospital has a telemedicine
    application that requires for its integrity that it receive a
    certain quality of service.
        So it is important to be able to manage it.
        Mr. Shimkus. And I appreciate that. That is part of my
    opening statement, the concern about a couple things,
    prioritization, buildout, more pipes, latency issue, especially
    for telemedicine, which is really applicable, and we would like
    to get it further developed in rural America.
        Mr. McSlarrow, can you talk about the importance of network
    management for your members, as many cable companies are
    relatively new entrants into the broadband market? And how
    would this legislation affect small cable providers' decision
    to enter into this market?
        Mr. McSlarrow. Sure. The broadband deployment by the cable
    industry is really a decade old. And, as you point out, there
    are many rural areas where we are still trying to build out
    those broadband networks. What is seamless to the consumer when
    they sit down at a computer and you have an always-on broadband
    experience, on the other side of that computer is the wild,
    wild west.
        And you have got a network manager who is dealing with
    spam. And just to give you a scale of it, one of my companies
    defeats a billion spam e-mails every 2 days. You have got
    botnet armies that have taken over millions of PCs that are
    engaged in all kinds of illegal transactions. You have got just
    the ordinary give and take, legal but nonetheless challenging
    problems of congestion. And someone is managing that for you.
    And so it is hard to break it down at any one time, but suffice
    it to say it is a fairly complex engineering challenge. And
    somebody is doing that all the time, and the good news is a
    consumer doesn't think twice about it, nor should they.
        Mr. Shimkus. Yes, it is a great point because for me to
    have teenagers in this era and how they consume electronics and
    how they get information. The YouTube phenomenon is amazing,
    but, Mr. McCormick, you testified about the bandwidth consumed
    by YouTube versus--YouTube consumed as much bandwidth as the
    entire Internet consumed in 2000. What would happen in a
    regime, an FCC regime like is being proposed in this
    legislation?
        Mr. McCormick. Well, again the most important thing is to
    have further investment in broadband buildout, further
    enhancements to broadband infrastructure. And what we are
    seeing today is that it is the very growth of applications that
    is fueling Internet buildout and construction.
        So what we don't want to have is a situation where the
    government chills that kind of innovation in an investment by
    creating uncertainty in the marketplace.
        Mr. Shimkus. And, Mr. Bainwol, you wanted to chime in on
    one of the questions that I don't know who asked. But I had a
    question first. Talk about the recording industry and your
    response to this legislation, and then if you would have a
    chance to respond to----
        Mr. Bainwol. Sure, we are in a situation over the last few
    years that comes close to crisis. As I spoke to in the opening
    statement, our sales are down nearly 50 percent during this new
    digital age. But we don't view the digital age as one that is
    going to trap us forever. I mean there is enormous opportunity
    out there if we make the right judgments.
        And I guess my plea to you and to this committee is that we
    approach these issues with a sense of balance. Openness is a
    vitally important concept. Innovation is a vitally important
    concept, but what is happening right now today on the Internet
    is a trampling of our property right. And the property right
    concept is so central to the American experience of capitalism
    and is so central to our economy that to set up a set of
    judgments that excludes and ignores what is happening in terms
    of the violation of our property right is the wrong way to
    proceed, which is why I applaud Chairman Markey and Congressman
    Pickering for clearly and directly articulating that unlawful
    activity can be dealt with by way of network management.
        The trick though is what are the forms of network
    management that are going to be used? I am not a techonologist.
    And will those forms of network management, whether you trip
    over somebody's concept of net neutrality. And that is my
    concern. We have got to find a way to lock down, to provide
    balance and debate, to deal with the property right, but to do
    it in a fashion that is respectful to balance.
        Mr. Markey. The gentleman's time has expired. The chair
    recognizes the gentlelady from California, Ms. Solis.
        Ms. Solis. Thank you, Mr. Chairman, and I will be brief. I
    just wanted to ask Mr. Scott his opinion--we talked a lot about
    fairness, the bigger fish eating the smaller fish so to speak,
    as my father would say. Can you please explain to us what net
    neutrality regulations--how that would either encourage or
    prevent Internet innovation?
        Mr. Scott. Sure, it is relatively straightforward. The
    Internet, as it has developed, has operated in a
    nondiscriminatory manner. That means that the market power of
    those who offer you Internet access, the DSL line into your
    house or your cable modem into your house, they can't use their
    market power to discriminate in the marketplace for content and
    services.
        And as a result, we have had the greatest free market
    experiment in the history of capitalism on the Internet. It has
    been extraordinarily successful. There are no barriers to
    entry. Anybody in their dorm room can have a great idea and
    become a billionaire.
        We have a problem when the market power from the wires
    begins to get transferred over into the market of content and
    services, and that market gets distorted. And in that context,
    deregulation is synonymous with cartelization. You are handing
    over the keys to that free market to those few market players
    who have control of the wires. And that is what kills
    innovation, and that is why an openness has been such a
    successful premise.
        Ms. Solis. My last question is both for Mr. Peterman and
    Mr. Bainwol. Could you please describe how you envision network
    management assisting and protecting against privacy of
    copyrighted material? And do you believe regulations about
    lawful Internet traffic would have an effect on those efforts?
        Mr. Peterman. Would you repeat the last part of that
    question?
        Ms. Solis. Do you believe regulations about lawful Internet
    traffic would have an effect on those effects? And that is
    protecting against privacy of copyrighted material.
        Mr. Peterman. Obviously I think--well, I will speak for
    my--we are both very much invested in protection of copyright.
    That is one of the reasons that the guild is in favor of the
    openness. There is an enormous amount of work being done on
    privacy and on control of copyright--piracy, sorry. And we just
    feel that once again we don't want to use the piracy issue. We
    don't want that to be an excuse for limiting our access to the
    Internet as a means of communicating with an enormous new
    audience.
        Obviously everybody seems to recognize this is an enormous,
    money-making, profoundly important economic and informational
    generator for this next century. Everybody here is in agreement
    with that. What seems to be the question is all right, how do
    we balance the protection of peoples' interest in making money
    with the consumers' interest in having an open market?
        We believe that fighting this bill in the name of
    preventing piracy is not an accurate way to help the industry.
    We think that there are constant innovations going on in piracy
    technology. Now there is ad-imbedded products that are involved
    in this. We feel that that is the way to do it, not to inhibit
    in any way the access that has made this the money generator
    that, as Ms. Eshoo said, is the reason why everybody is here
    today. We want to keep it the way it has been because it is
    working so extraordinarily well.
        Mr. Bainwol. And I am obviously focused on the unlawful
    piece of this equation, and the question here is how do we most
    urgently address this question. And my fear is that legislation
    will take time. It will take time to process, to pass, to do
    the study. And we have a problem that is right now, and the
    best way to address that problem is for us at the table--the
    ISPs and content--to get together in a private way with a sense
    of urgency and a sense of commitment to results to deal with
    this. And you deal with it by a way of graduated notice
    programs and by way of technology, whether it is filtering or
    watermarks.
        That discussion has to take place, and it has to be results
    oriented. And if it is not results oriented, then I am going to
    be back here, and I am going to say members of this committee,
    we need your help because there is a sense of urgency that has
    to be responded to.
        Ms. Solis. Thank you. Thank you, Mr. Chairman.
        Mr. Markey. Would the gentlelady just yield briefly? She
    has 35 seconds left. Would the gentlelady yield? Yeah.
        Ms. Solis. Yield, yes.
        Mr. Markey. Yes, again I just want to make it very clear
    that on copyright protection, we all agree. There is no debate
    on this committee at all on vigorous 100 percent enforcement of
    copyright. Whether it is software developed in Silicon Valley
    or in my district for business use, whether it is some
    recording artist, some television show, a movie, we want it to
    be protected: copyright.
        But when the means of conduit change, when you move from
    radio to television to cable now to the Internet, we have to be
    constantly making sure that it is not used in an
    anticompetitive way against content, against copyright-
    protected content. So distinguish between content protection,
    we all agree it is 100 percent. And then competition, new means
    of conduit, carrying it, that sometimes can lead to
    anticompetitive activity against content, that doesn't have an
    affiliation with the large telephone or cable companies. That
    is the distinction, and I just want to clarify that once again
    for the record.
        The chair recognizes the gentleman from Mississippi--I am
    sorry, the chair recognizes first--I did not realize the
    gentleman from Mississippi had already been recognized. The
    chair recognizes the gentlelady from California, Ms. Capps.
        Ms. Capps. I thank you, Mr. Chairman, and I am overstaying
    my time, my own limit. So I am going to restrict myself just to
    one question. This is a very interesting panel, so I want to
    thank you all.
        Mr. Yoo, as you know, innovation on the Internet evolves at
    such rapid pace, oftentimes leaving policymakers and even
    Internet service providers playing catch-up. Looking toward the
    future, do you ever see a time when the supply of broadband
    access will be able to keep up with demand? Or do you believe
    that to currently be the case?
        Mr. Yoo. The deployment rates suggest that we may see it
    keep up with demand in the backbone. They are adding tremendous
    services in the core. The big problem is in what we call the
    last mile, whoever provides the connection locally. We are
    seeing increasing diversity of providers in the wireless space,
    and the 700 megahertz auction is going to add some new
    providers in that space.
        The big problem is no one can foresee the future perfectly,
    and everyone will configure even local--even if there is extra
    bandwidth, they will build it where they think the people are
    going to be. They are going to guess right sometimes. They are
    going to guess wrong sometimes.
        And YouTube, we talked about, is now 20 percent of all
    Internet traffic, and no one saw that coming. And it is very
    difficult for them to be perfect in terms of adding capacity
    because no one is that good. So sometimes you end up using
    other techniques to deal with the fact that you have actually
    done your best, but you have misestimated the demand.
        Mr. Markey. I thank the gentlelady, but if I may just
    reclaim the--just finishing out the balance of the gentlelady's
    time. Actually no one saw it coming, that is that YouTube would
    consume so much, except for Chad Hurley, except for the kid who
    invented it, except for the kid that said hey, look at that
    aperture, look at the Internet, look at this wonderful thing
    that I might be able to do. So except for this proverbial kid
    in the garage who comes up with the idea that revolutionizes
    this entire industry, you are right. No one for sure saw it at
    a big telephone company or a big cable company. That is 100
    percent for sure.
        And it is not to say that that is a bad thing because they
    have a role. They have a very important role to play. But the
    innovation historically comes from the proverbial kid in the
    garage, this young graduate student or even younger that is
    always thinking about how to create new ways of providing
    content over the means of conduit that is being created.
        So I just, again, want to make it clear that we are trying
    to protect young Chad Hurley, young Mark Andresin. OK, and the
    whole point is that the innovation is driven by these millions
    of kids that are all at home, that are manipulating, thinking
    about these technologies every day. And at the same time, we
    want to protect the copyright of any content which is produced.
    All right, but we don't want it to get managed out of
    existence.
        The chairman of AT&T sat here in 1978 in a hearing--I have
    been here for 32 years on the committee. And we were then
    debating whether or not someone should be able to go to a store
    and buy a phone that wasn't a black, rotary dial phone and to
    plug the phone into the wall. And the chairman of AT&T said
    here, my goodness, if that ever happened up in Boston, it could
    bring down the whole phone system of Boston if someone could go
    to a phone store and buy a phone rather than rent it from us
    for $3 a month, which my mother, Mrs. Markey, rented that
    black, rotary dial phone for $3 a month for 40 years. Paid
    about $1,200 to rent the black, rotary dial phone.
        And AT&T, the old AT&T, the Bell Labs AT&T, even though
    they had already won like three or four Nobel prizes, in
    theory, when you said can someone buy a phone and plug it into
    the phone jack in the living room. No, it will bring down the
    whole system. Network management principles, they explained to
    us, are very important. We just can't have anyone making a
    phone and anyone plugging it into the wall because it would
    ruin our network management.
        How long will it take you before you figure that out so
    people can buy other phones? And he said well, about 10 more
    years. And so I said, Mr. Chairman, we have got to break up
    AT&T. If it takes you 10 years to figure out how people can buy
    a different phone except that which is leased as a black,
    rotary dial phone in the living room.
        So network management has always been used by the big
    companies, always, from the very beginning. It is a principle.
    That is one of the underlying principles of the big
    communications companies, that network management is used as
    the first argument against innovation, against the consumer
    having more choices. And so that was actually the hearing at
    which I began my efforts to break up AT&T, and it was just me
    and one other member of this committee, by the way, back then,
    long ago and far away. There are a couple people in the room
    who remember that.
        Mr. Pickering. Mr. Chairman, could you yield just a second?
        Mr. Markey. Go ahead, sir.
        Mr. Pickering. Which president broke up AT&T?
        Mr. Markey. Actually, this is scary, OK, to think that it
    was Ronald Reagan----
        Mr. Pickering. Thank you.
        Mr. Markey [continuing]. That broke it up. And which shows
    again the bipartisan nature of this whole issue, OK. It is
    competition versus openness, innovation. Let me recognize now
    the gentlelady from California, Ms. Eshoo.
        Ms. Eshoo. Thank you, Mr. Chairman. Thank you to all the
    witnesses. I think that it is healthy to be able to look at all
    of this with some sense of humor. You know it is professional
    humor, but it is some humor about our past and our resistance
    to things. And then when we look at it from--going fast forward
    a couple of decades later, we realize that where some of the
    louder voices stood, that it was really kind of ridiculous.
        When Mr. Markey gives the description of the black phone
    that was really reliant. I mean that thing worked. Now our
    phones are like retractable pens. They don't work. We pitch
    them out. We get another one. But we are where we are, and I
    think that in some ways we are so much enjoying the success of
    what we built that we say because we built it and it is so
    successful that we don't need to protect that in some way.
        And so I think, Mr. Chairman, that we that support this
    effort have a pretty tall challenge. I am going to be real
    frank. In the last Congress, we had 152 cosponsors, I believe.
    We are starting out in this one, and the argument is still that
    there isn't anything that is broken, everything is terrific,
    and nothing needs to be done.
        And there are some of us that say, you know, the
    ingredients that made this so successful really need to be
    protected and that there are some things that are somewhat
    disturbing about what is going on. So I would like to just ask
    a couple of questions.
        First, Mr. McCormick, do you believe that the broadband
    policy principles adopted by the FCC are enforceable? You do?
        Mr. McCormick. Congresswoman Eshoo, the Supreme Court has
    made it clear that the FCC has authority to take action against
    anyone who violates----
        Ms. Eshoo. No, not whether it can be or not, but do you
    think that they are enforceable?
        Mr. McCormick. I believe----
        Ms. Eshoo. You do?
        Mr. McCormick [continuing]. The FCC has authority to take
    action.
        Ms. Eshoo. There was nondiscriminatory language in the
    Communications Act. Why is this legislation menacing to you
    when you see what the outcomes of that language are from the
    Telecom Act?
        Mr. McCormick. That particular language dealt with monopoly
    era on communications. It did not apply more broadly to others
    who are offering broadband service. It did not apply to the
    Internet backbone. It did not apply to cable service. It did
    not apply to broadband over power line. It did not apply to
    satellite-provided broadband. And so what we have is a very
    competitive atmosphere today. We have, like in your district,
    over two dozen broadband providers. And we think that that
    competitive marketplace is consistent with what has made the
    Internet great.
        Ms. Eshoo. Except the people that are opposed to the
    legislation aren't very comfortable that there is enough
    competition and that the little guys not be able to break into
    it. That is where, I think, we have the debate, and I don't
    know whether this more targeted legislation has the ability to
    be non-menacing to people that have really already made up
    their minds and voted a certain way before. I think that is the
    issue that is before us really. I hope that we can be
    successful because I think everything isn't perfect in this
    paradise that is being described by some.
        The well-respected professor and technology expert, Larry
    Lessig, was before the Senate recently, and I think he used a
    very interesting analogy. And that is that he described the
    Internet infrastructure a lot like the electrical grid and said
    Sony and Panasonic are invited to develop new technologies that
    use the network and that they don't need permission from
    network owners. And the network doesn't ask whether the TV is
    made by Sony or RCA.
        Now, by no means is the network free. Neither is the grid.
    We all pay an electric bill, and we pay for what we consume.
    Why is broadband access different than this description? Who
    would like to weigh in on that?
        Mr. McCormick. Well, I will try it. I don't know of any
    situation where there is an inability on the part of the
    consumer to access any lawful Web site. So----
        Ms. Eshoo. Well, I think that we have some problems, and I
    think that Mr. McSlarrow maybe can say something about this and
    the BitTorrent situation. Is that not cause for concern? I am
    not trying to penalize anyone. I mean, around here what counts
    is big. So the bigger the outfits, the more influence they have
    with a big legislative body. Have you done many important
    things? I mean the investments that cable is invested is
    extraordinary.
        But I want new outfits to be born. I want to see a lot of
    babies, not just parents. So is BitTorrent not a chip in the
    armor of this?
        Mr. McSlarrow. I don't think so. I think the interesting
    thing is that peer-to-peer networking is a relatively new
    phenomenon in a marketplace that itself is relative immature. I
    mean, we are talking a decade, and to the average consumer who
    wants to use peer-to-peer technologies, they do, and they don't
    even notice any network management taking place.
        But what is happening right now is that ISPs, peer-to-peer
    applications companies, other technology services, are all
    talking about how you can do peer-to-peer in a way that
    consumes less bandwidth, that is more user friendly, and I
    think there is actually a cause for celebration that in the
    private sector, those conversations are taking place in the
    absence of regulation.
        Ms. Eshoo. Well, I can see where we are. Everybody is
    sticking to their own story essentially, and so, we have to
    bring about some kind of meeting of the minds because I think
    if we don't, then there will be a degradation and a
    continuation of some manifestations of degradation.
        Is it 100 percent or 80 percent? No, and I don't think
    anyone is pretending that that is what it is. But there are
    cases of degradation, and I think it always ends up being in
    the interest of growing and larger companies to be tempted to
    protect what they have and not let another foot in the door. I
    think it is just the nature of the animal. And so we need more
    cosponsors. We are going to work on that. I thank everybody for
    being here.
        Mr. Markey. I thank the gentlelady, and, of course, the
    gentlelady has been a national leader on all of these issues
    throughout her entire career. And we thank her for being here.
    And now we turn and recognize the gentleman from Michigan, Mr.
    Stupak.
        Mr. Stupak. Thank you, Mr. Chairman. Mr. McSlarrow, sorry I
    have been bouncing back and forth because I have been upstairs
    there. But do you believe the FCC has the authority to address
    the discrimination issues on the Internet?
        Mr. McSlarrow. I think it is ambiguous. I think the Supreme
    Court and the FCC have asserted Title I ancillary authority,
    and it is clearly broad although not unlimited. But they
    haven't actually passed or enacted a rule doing something like
    that today.
        Mr. Stupak. OK, you stated that 5 percent of the customers
    use anywhere between 50 to 90 percent of the total capacity of
    a broadband network. Can you tell me how you came up with that?
        Mr. McSlarrow. Well, it is one estimate, and there are
    many. But they are all roughly in that range. Some actually are
    worst case scenarios where you are talking about 1 percent of
    consumers using the vast majority. I know in one example I went
    out to one of my operators, a mid-size operator serving about a
    million customers, and the number of people who consume over 50
    percent of bandwidth and over 70 percent at peak congestion
    times is small enough that they are on a first-name basis with
    these people. So I mean it differs obviously network by
    network, but there is this disparity between the number of
    users, particularly at peak congestion, and the bandwidth
    consumers.
        Mr. Stupak. Mr. Savitz, how are the costs to host your
    business online determined? And how has that changed since 1999
    when you first started?
        Mr. Savitz. I am sorry. I didn't hear. Can you say that
    question again?
        Mr. Stupak. How is the cost determined for you to be on the
    Internet?
        Mr. Savitz. How is the cost determined? Well, as you
    continue to grow scale, you have to increase infrastructure.
    When you have to--it becomes an expensive value proposition in
    terms of what we have to invest to be able to have Internet
    access, which is why when I talked about before during my
    testimony to say that the people on the other end aren't making
    tremendous investment. We are absolutely making an unbelievable
    amount of investment. It is an extremely costly proposition
    that you have to be able to succeed with the consumer to make
    it at all make sense.
        Mr. Stupak. Well, you said you started in '99. You had just
    a few employees, and you have greatly expanded. How have your
    costs done the same just to be accessed on broadband?
        Mr. Savitz. Well, the beautiful thing about the--our costs
    have exponentially increased disproportionate to our revenue
    growth. So the costs have scaled, but because of the innovation
    and disability of this open platform, you are actually able to
    generate business in the sense that, at Shoebuy.com, we do over
    $1 million per employee.
        Mr. Stupak. What was it in '99 then per employee?
        Mr. Savitz. Well, we actually formally launched the site in
    January 2000, so it was a terrible metric at that point.
        Mr. Stupak. Well, the point being you invested, but yet you
    saw return on it, right?
        Mr. Savitz. Yes. Again, that is why I am here today. It is
    fairly incredible to think that by being very scrappy and
    innovative and entrepreneurial, we were actually able to get
    enough visibility and get out there and actually market the
    value proposition of Shoebuy to get enough visitation and
    enough transactional performance that we were able to scale
    now, at the present point of time we get over 4.5 million
    visitors a month.
        Mr. Stupak. OK. Now, Professor, do you think it is possible
    to establish some simple baseline expectations of
    nondiscrimination for the Internet that does not interfere with
    good networking management but preserves consumers' right to
    access content?
        Mr. Yoo. Past experience does not give the tremendous
    variety of technologies. Wireless, cable, telephone are so
    different. They are subject to congestion in very, very
    different ways, but it is very, very difficult for them to
    manage that. It also depends on how much traffic is being
    generated. It is not even technology based, just on the local
    conditions.
        And the one thing that I wanted to say in this hearing is
    that one thread that came up in some of the filings is it is
    also very different for rural providers. Is that because they
    only have a very limited of bandwidth that if they can't
    discriminate a little bit between--basically it is video. If
    they can't dial back video a little bit, one person downloading
    video soaks up the entire bandwidth for everybody.
        And so when we are talking about protecting the little
    people, little proprietors, in the attempt to create
    competition in the space, many of the rural providers will fall
    on the other side because they need those sorts of ability to
    discriminate because determining what is good discrimination
    and bad discrimination and what is cost justified and not cost
    justified, an antitrust law and an FCC law has been extremely
    difficult, and when the product is complex, almost unworkable.
        Mr. Stupak. I want to ask you a question I asked Mr.
    McSlarrow. As a law professor, what is your view of the FCC's
    ability to enforce policy and discrimination on the Internet?
        Mr. Yoo. As of now, the Supreme Court has indicated that
    they have the authority. The FCC by its own statement said we
    are not promulgating rules, and that can be reasonably
    interpreted as they have not as yet exercised that authority.
    They have an ongoing proceeding right now asking for all the
    examples, and they have indicated on five occasions that they
    are willing to enact rules if they get the record. But the
    record wasn't there yet in 2005, and the order and the merger
    clearances.
        What is fascinating to me about the Bell South merger
    clearance is they did make one exception. They put in the
    network neutrality rules, but they said we will make an
    exception for IPTV. Why? Because we needed them to compete with
    cable, and without the ability to channelize that or without
    Comcast's ability to separate out its voice traffic, it can't
    cross-compete with the other types of providers.
        Mr. Stupak. Well, do you believe the FCC, through its
    ancillary authority, have the right to combat any perceived
    violations of its policy statement even though they really
    haven't exercised the authority?
        Mr. Yoo. On a proper record with proper notice and comment
    and an explanation of how it fits with the past decisions or
    whether they are breaking with them, I believe they have the
    authority. It is just a question of whether they properly
    exercise it in accordance with administrative law.
        Mr. Stupak. OK. All right, let me ask this question if I
    may then. You mention how the predominant use of the Internet
    has gone between a peer-to-peer architecture and because of
    YouTube is returning to a client server architecture. You also
    say that this provides, and I am quoting now, ``uncertainty for
    the business environment,'' but in order for either
    architecture to flourish, wouldn't open access be necessary?
        Mr. Yoo. It raises a whole bunch of problems. If you are in
    a peer-to-peer architecture, you allocate upload and download
    speeds more symmetrically than you do if you are just
    downloading. If you are downloading, all you are sending up are
    Web site addresses, these little short pieces of code, and you
    have taken down tremendous files.
        Second, in the world before, where you have a Web site, you
    usually count the bits that the Web site puts out--in answer to
    your question to Mr. Savitz--on a 5-minute basis, and you
    charge them based on their highest volume over a 30-day period,
    using the 95th percentile volume. You don't get the absolute
    peak because there are little spikes. You just tail them off.
    And that is how we have counted it. So if a Web site downloaded
    100 times, it created 100 times of downloads.
        In a peer-to-peer world, you can download once, store it
    among end users, and yet serve 100 downloads on the user side
    with only generating one payment on this side. So if you move
    to a peer-to-peer world, you need to start metering the end
    user side because they are now generating congestion that we
    were previously capturing on the server side that we can't
    capture anymore, which is not just a question of regulation. It
    is a question of business models. It is usage sensitive
    pricing. Some of the models that Time Warner began to
    experiment with, but it has--profits on objections from Mr.
    Scott and some other people in the community about the concerns
    in the network neutrality space.
        My point is it is a very complex problem. They are going to
    have to redesign the architecture of the network based on a bet
    whether peer-to-peer or filing sharing is going--downloads are
    going to win. They are going to have to redesign their business
    models, and they are going to have to remanage their networks
    in very different ways and put the meters in different places.
        Mr. Stupak. Thank you.
        Mr. Markey. The gentleman's time has expired. The chair
    recognizes the gentleman from Nebraska, Mr. Terry.
        Mr. Terry. Thank you, Mr. Chairman. I enjoyed seeing your
    presence for a few minutes downstairs in the other hearing. I
    tried to reduce the issue into kind of one statement, one
    simple statement, and what I concluded is can we expect
    continued innovation and development of and within the Internet
    under an additional regulatory scheme, no matter how benevolent
    the scheme may sound. So, Mr. McSlarrow and Mr. McCormick, I
    have two kind of simple questions.
        One is, is there becoming such a problem with reduced
    access or discrimination, bad practices within the Internet,
    that the sky is falling, we have to have a new regulatory
    scheme? And will a regulatory scheme enhance or retard
    development and uses within and of the Internet? Mr. McCormick,
    you have been silent since I have been here. Why don't you go
    first?
        Mr. McCormick. Well, thank you very much, Congressman. The
    Internet is full of innovation. As I said in my statement, for
    health care, for education, it is improving the environment, it
    is improving personal security. Each of these applications has
    different network requirements. We believe that there should be
    no preemptive prohibition against innovative business plans,
    partnerships, and use of the network.
        And there is, at this point, no suggestion that any of the
    companies that I represent are in any way acting in a way that
    is not in conformance with the policy principles articulated by
    the FCC. So we think that this new language does create
    uncertainty, and we don't know when it says ``guard against
    unreasonable discriminatory favoritism of content based upon
    source or destination,'' how does that impact a health care
    application? How does that impact a personal security
    application? Those are applications that we are working,
    through network management, that do have different requirements
    for both source and destination. So we think that this is
    regulatory, and it would show investment and innovation.
        Mr. Terry. Mr. McSlarrow, your thoughts?
        Mr. McSlarrow. I have to confess to a certain amount of
    frustration as much as I am glad to reprise my usual role as
    Mr. Markey's foil. The interesting thing about this is, and I
    am thinking about the '78 hearing with the chairman at AT&T.
    That is not the world we live in today, and those aren't the
    people we represent. And I admit full well both cable,
    telephone back in the monopoly era, totally different. But they
    think differently today.
        And we said several years ago, we want our customers to
    access every Web site, to use every application, to use every
    service on the Internet. We told this committee and your
    counterpart in the Senate, we want them to be able to attach
    any device to the network so long as it doesn't harm the
    network. That is our policy because that is what we want our
    customers to have, and if we didn't do it, in the case of
    cable, they would go over to Walter's companies and vice versa.
        So the innovation and the investment that Walter just
    talked about is clearly present. But really what this is about
    is our perspective is we are standing in the shoes of our
    customers. We want them to have a superior experience. And the
    hard cases where you are talking about a few affecting the
    experience of the many, people have to make judgments. And they
    could be right or wrong. But to your point about whether or not
    regulation makes it better, I just don't see how that could
    possibly be the case.
        And that is really the concern here is not the goals, which
    we share, it is the reality of regulation in a space that has
    been up until now unregulated.
        Mr. Terry. All right, thank you. Mr. Yoo, are there a lot
    of bad practices, discriminatory practices that are occurring
    today that should give rise to a new regulatory scheme and that
    would be unreasonably discriminatory today?
        Mr. Yoo. They opened notice of inquiry, and the FCC has
    invited parties to file. And so this was the moment where the
    record is supposed to be made. And as Mr. McSlarrow has
    indicated, there are basically four examples in the record, two
    of which really don't involve Internet content. The one
    example, the Pearl Jam example, AT&T was hosting something on
    its Web site, decided it no longer wanted to be associated with
    that speech. I don't personally agree with the decision, but
    what most people would say what you actually host on your own
    Web site is protected. You have discretion over that. And I
    guess my bottom line of that is there are very few examples and
    usually not the kind of volume of examples you would need for
    regulatory limit.
        Mr. Markey. The gentleman's time has expired. The chair
    recognizes the gentleman from Mississippi, Mr. Pickering.
        Mr. Pickering. I just wanted a quick follow up question and
    then close, summarize real quickly. Mr. McCormick, do you think
    that the FCC has the current authority on a case-by-case basis
    to enforce their network neutrality principles?
        Mr. McCormick. I think that based upon the Supreme Court's
    decision in Brand X that the FCC has authority, ancillary
    authority, to take action against what it would consider to be
    activities that would not be in conformance with its
    principles.
        Mr. Pickering. Mr. Yoo, you had summarized in your
    statement that a case-by-case approach could be the best way to
    proceed. If the FCC has the authority, whether that is in
    dispute or not, but if it is clarified and then the outcome of
    this effort was to strengthen and give certainty that the FCC
    does have that authority on a case-by-case basis, would that be
    a good outcome?
        Mr. Yoo. I think that would be a good outcome. The only
    question I have about the current legislation is it actually
    makes a commitment to a set of baseline principles, which could
    actually interfere with case-by-case decisionmaking to the
    extent to which we had one baseline for one technological
    reality or be shaped by one technology. We have a different
    technology or a new technology come along, and then all of a
    sudden the baseline is no longer really well designed for that
    context.
        But the idea of a case-by-case method I support. It is the
    notion of baseline principles that give me pause and trouble.
        Mr. Pickering. And Mr. McSlarrow, Mr. McCormick, let me
    just ask one question of whether this is a legitimate concern
    or not. Because I think in the marketplace today, we are not
    seeing many problems, to be honest. We do have concentration
    occurring in cable and telecom and wireless. And the question
    is as you begin, for example, in wireless to have an exclusive
    Apple with iPhone, do you see a business model where you would
    want to do an exclusive with Yahoo! or Microsoft or content
    providers? Or if not an exclusive, a preferential agreement
    that may be with the big record producers but not with the
    independent record producers, or with some in Hollywood but not
    others in Hollywood? Do you all see that type of business model
    being considered, and would it make sense?
        Mr. McCormick. I am not aware of any instance where any of
    our companies are looking at a business model that would, for
    example disadvantage access to the shoe Web site.
        Mr. Pickering. But in the future, do you want the option--
    codifying the principles, does it take away that option from
    you, and does that concern you?
        Mr. McCormick. I believe that if you have a competitive
    environment, as we do today, where the barriers to investment,
    in offering broadband services are extraordinarily low, that as
    people are investing in broadband, one of the ways they may
    capitalize their investment is through innovative partnerships.
    We are seeing that with university networks. We are seeing that
    with a variety of unlicensed, wireless-based networks, and
    therefore I think that it would be a mistake to preemptively
    prohibit innovative partnerships that may lead to our goal of
    increased broadband deployment and competition.
        Mr. Pickering. Thank you, Mr. McCormick. I see that my
    time, and I am about to defer to the chairman. I want to thank
    you for working with me on this legislation. I do think it is
    the reasonable common ground, that it clarifies current policy
    and principles. I do not believe it will lead, and I hope it
    actually prevents us from having a new regulatory scheme
    adopted.
        I hope it gives clarity and certainty that this will be the
    business model going forward. And from a principle,
    philosophical point of view, it is the way to maximize freedom,
    whether it is economic, political, or personal, that we have in
    the Internet.
        And if we can have support from the Christian Coalition to
    the Planned Parenthood, from independent record producers to
    major labels to the writers in the creative community to the
    small business community, I think that it is a wise and well-
    reasoned and principled, from a freedom point of view, way to
    go. And it is not--if you look at the counterpart on the
    Senate, Snowe-Dorgan, very regulatory, very prescriptive. This
    is very balanced, and it is consistent with the committee's
    work under Republican majority and consistent with the
    Republican commission's principles adopted.
        And I do think that it clarifies network management or
    strengthens it, and it clarifies lawful to unlawful uses. And
    this is a good ground upon which to start in this committee of
    getting the consensus to promote American values and ideals and
    a good way. And I hope that we are successful, Mr. Chairman, in
    our efforts to do. And I look forward to working with you on
    it.
        Mr. Markey. The gentleman's time has expired, and the chair
    will recognize himself. And just to close the hearing and to
    say that I value my partnership with the gentleman from
    Mississippi. This issue really should not be Democrat,
    Republican. It should just be an evaluation of what is needed
    in order to ensure that we see the innovation out in the
    marketplace without giving protection to the pornography, the
    piracy, the other practices that legitimately should be looked
    at as areas that are still subject to the traditional laws. And
    I don't think there is going to be any compromise on that.
        But let me just say that Comcast, AT&T, Verizon, and Time
    Warner have 66 percent of the market. And most Americans, 94
    percent of all Americans, only have a choice between their
    telephone company and their cable company for broadband
    service. So, you know, Mark Twain used to say that history
    doesn't repeat itself, but it does tend to rhyme. So it is not
    exactly like 1978, but it is something that rhymes with 1978.
    It is very close to 1978. It is a digital duopoly that we have
    now rather than just one telephone company. But it still is
    restrictive and unnecessarily so in terms of the incentive that
    we need to create for entrepreneurs, for new ides to enter into
    the marketplace.
        Back then in 1978, as part of network management, AT&T used
    to argue that the cable company should not be able to put their
    wire on top of a telephone pole, that they should have to build
    their own poles across America. Now these poles, because of the
    financial state of the cable industry, would probably have been
    three feet tall right next to the telephone pole back in 1978.
    So network management, OK, but we want this revolution, the
    cable revolution. So we mandated that for a reasonable charge
    that the telephone company would have to give the cable company
    access to it.
        When a company called MCI came along and said we have this
    new phone service, AT&T said that is fine, but you will have to
    dial 23 digits before you actually reach the phone number that
    everyone has memorized. Network management. Too hard for us to
    figure it out, and we had to, through regulation and laws, make
    it possible for MCI and Sprint and these other companies that
    we now know to be able to compete. Otherwise, network
    management would be used as their block.
        Same thing is true for telephones. Same thing is true et
    cetera et cetera. So here in no way do we want to impose
    burdens upon AT&T, upon Comcast, upon Time Warner, upon Verizon
    that are excessively burdensome. We don't. But we want to make
    sure at the same time that principles are established that
    allow the companies that don't own these wires to be able to
    innovate and to be able to reach millions of consumers across
    the country while compensating the phone company and the cable
    company reasonably for the use of their wires. That should be
    the principle.
        And in fact, while the DSL technology sat for years in the
    laboratories of the phone companies, beginning with the '96
    Act, there was a massive deployment because of the kind of
    Darwinian paranoia inducing principles that were built into the
    1996 Act. But everyone abided by those long-standing principles
    against unreasonable discrimination from '96 on until the
    Federal Communications Commission reclassified that service in
    2005.
        And so that is really what we are talking about. A whole
    history here that kind of changes in 2005, and we have to find
    a way of reconciling this so that we have the smaller voices.
    We have the smaller entrepreneurs who are able to act.
        And by the way, I just want to add, Mr. Yoo, that it wasn't
    the founders of Google actually who discovered how YouTube
    would work. It was the proverbial kid in the garage. So I want
    to say that as well. Not only AT&T and the cable companies, but
    also even this large company Google didn't invent it. It was a
    smaller, entrepreneurial, younger person. And so all of this is
    central to the long-term well being of our country.
        You know what I have decided to do? Let me just finish
    here. Without objection, a statement of support for the bill
    from the National Association of Realtors as well as from the
    Independent Film and Television Alliance are entered into the
    record. I am going to give each one of you 30 seconds very
    quickly to tell us what you want us to remember. It can only be
    30 seconds because of action on the House floor. Let me begin
    with you, Mr. McCormick, if you would tell us what you want the
    committee to remember.
        [The information appears at the the conclusion of the
    hearing.]
        Mr. McCormick. Mr. Chairman, as you proceed forward, please
    do so in a way that does no harm to innovation and investment.
        Ms. Combs. We just want to keep the Internet fair and
    neutral and this discriminatory material that--we don't want
    any more discrimination on the Internet.
        Mr. Markey. Mr. Bainwol.
        Mr. Bainwol. We are going to roll up our sleeves, get to
    work with our colleagues in the ISP community to try to solve
    the piracy problem, and we will report back to you, sir.
        Mr. Markey. Thank you, Mr. Bainwol. Mr. Peterman.
        Mr. Peterman. The Internet has been an extraordinary
    opportunity artistically, economically, informationally,
    educationally. We urge you to err on the side of openness,
    keeping it open, and letting opportunity for all flourish
    rather than concentrating power into smaller groups.
        Mr. Markey. OK, Mr. McSlarrow.
        Mr. McSlarrow. We want our customers to do anything and go
    anywhere on the Internet. We think we can do that without
    government regulation, and we do think that a full examination,
    as you suggested, will show that that is the case.
        Mr. Markey. Mr. Savitz.
        Mr. Savitz. An open network that is fair and equal for all
    so other entrepreneurs can do what we were able to do at
    Shoebuy.
        Mr. Markey. Mr. Yoo.
        Mr. Yoo. There is growing empirical evidence that the kinds
    of openness actually deters investment in networks. And what we
    are seeing is an incredible increase in the variety of uses in
    the network and technologies. One-size-fits-all threatens all
    the variety and the chances of letting the network evolve.
        Mr. Markey. And Mr. Scott.
        Mr. Scott. I would say continue your efforts to build
    consensus around these important consumer protection
    principles. They belong in the law. And as you talk with your
    colleagues about this important issue going forward, ensure
    them it is a question of when and not if we will have rules
    protecting consumers and the free market. And it is not just
    about how we are going to explain to industry why we need
    consumer protections in the law. It is how we are going to
    explain to the public if we don't have them in the law. That is
    where I would leave it.
        Mr. Markey. I thank you, Mr. Scott. I subscribe to that
    view. My mother always said try to start out where you are
    going to be forced to wind up anyway. So we eventually will
    have rules, so let us try to figure out what they should be.
    Let us make them reasonable. We already passed legislation 2
    years ago on a bipartisan basis with the Republican leadership
    of the committee supporting it. The bill that the gentleman
    from Mississippi, Mr. Pickering, and I are cosponsoring with
    other members of the committee are based upon that bill that
    already passed.
        So it is not something that is radical, and it is not
    something that, in our opinion, would have any undue influence,
    any improper influence on the large carriers. But I think the
    strength of our position, if I can say this to the gentleman
    from Mississippi, is that the arguments that are being used
    against us are arguments about another bill that we do not
    support. And that is where they have to go if they are going to
    attack our bill.
        We need to have the principles understood, this debate
    aired out, and for us to pass the legislation. That is our
    intention, without harming the cable industry or the telephone
    industry. We think we can strike that proper balance. We thank
    this distinguished panel for your excellent testimony today.
    This hearing is adjourned.
        [Whereupon, at 12:40 p.m., the Subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

                       Statement of Hon. John D. Dingell

        Thank you Mr. Chairman.
        One thing is for certain, Mr. Chairman--network neutrality
    is an issue that is here to stay. The last time this
    Subcommittee considered the issue of network (net) neutrality,
    it was in the last Congress in connection with the
    Communications Opportunity, Promotion, and Enhancement Act, or
    the COPE Act. I would note that, in the early stages of
    negotiations on the COPE Act, the Subcommittee was well on its
    way to reaching bipartisan agreement on most key issues,
    including that of net neutrality. But, as I said then, a funny
    thing happened on the way to the forum. The majority elected to
    go it alone, abandoned the bipartisan approach, and pushed
    through a bill that did not fully address very legitimate net
    neutrality concerns. That bill failed to become law, in part
    because it did not adequately address net neutrality.
        This is the first time we will have a full hearing focused
    solely on legislation relating to net neutrality, and it is an
    issue about which I have great interest and harbor significant
    concerns. Over the last several years, the Federal
    Communications Commission (FCC) has deregulated residential
    broadband services. As a result, consumers no longer have
    explicit protections in the Communications Act from
    discriminatory or unreasonable behavior by broadband network
    operators. Many maintain that the FCC can use its ancillary
    authority to ensure that broadband networks remain open and
    fair. The Commission has also adopted a broadband policy
    statement, but its ability to enforce the principles set forth
    there has been called into question.
        I am pleased that recently, when there have been missteps
    by network operators with respect to ensuring a fair and open
    Internet, those missteps have been quickly corrected. I suspect
    this is due in no small part to the strong and watchful eye of
    the Congress and others. And while I am encouraged by the
    course corrections some network operators have made, it also
    suggests that this is an area where we must continue to be
    vigilant.
        Recently, the focus of discussions about net neutrality
    appears to have shifted. While debate at the time of the COPE
    Act focused on the ability of consumers to have unfettered
    access to the content, applications, and services of their
    choice, today we discuss when and whether network operators can
    impede that access for some consumers to benefit the majority
    of their subscribers. While I am pleased that network operators
    seem to have accepted that they should not be permitted to
    interfere with their customers' access to the world-wide Web, I
    am concerned about how ``network management'' activities can be
    carried out in a reasonable way that does not work to the
    detriment of consumers and independent content providers. These
    are my concerns, and they are the concerns of the University of
    Michigan and others in my district.
        I hope that the panel addresses a few of the following
    questions. First, what are the reasonable limits of network
    management? How can we be sure that network management is used
    for worthy pursuits without impeding competition and ultimately
    harming consumers? Second, what would happen if network
    operators start to not only charge consumers for Internet
    access, but also to charge the content, application, and
    service providers that consumers want to reach? What are the
    costs and benefits of such an approach for network operators,
    consumers, innovation, free speech, and new entry by the
    smallest, newest Internet companies? Finally, what is the
    status of the Commission's ability to protect consumers? Is its
    broadband policy statement enforceable? If not, what authority
    does the Commission have to ensure that network operators do
    not act to the detriment of consumers? Should that authority be
    made explicit? I remain troubled by arguments made by some that
    suggest the Commission is powerless to act today should trouble
    arise.
        Thank you, Mr. Chairman, and I look forward to today's
    testimony.
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