[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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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).
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    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\
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    \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).
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    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.
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                              ----------                              

    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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