[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
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________
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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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