[Senate Hearing 110-1138]
[From the U.S. Government Publishing Office]
S. Hrg. 110-1138
THE FUTURE OF THE INTERNET
=======================================================================
HEARING
before the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
APRIL 22, 2008
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
DANIEL K. INOUYE, Hawaii, Chairman
JOHN D. ROCKEFELLER IV, West TED STEVENS, Alaska, Vice Chairman
Virginia JOHN McCAIN, Arizona
JOHN F. KERRY, Massachusetts KAY BAILEY HUTCHISON, Texas
BYRON L. DORGAN, North Dakota OLYMPIA J. SNOWE, Maine
BARBARA BOXER, California GORDON H. SMITH, Oregon
BILL NELSON, Florida JOHN ENSIGN, Nevada
MARIA CANTWELL, Washington JOHN E. SUNUNU, New Hampshire
FRANK R. LAUTENBERG, New Jersey JIM DeMINT, South Carolina
MARK PRYOR, Arkansas DAVID VITTER, Louisiana
THOMAS R. CARPER, Delaware JOHN THUNE, South Dakota
CLAIRE McCASKILL, Missouri ROGER F. WICKER, Mississippi
AMY KLOBUCHAR, Minnesota
Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Lila Harper Helms, Democratic Deputy Staff Director and Policy Director
Christine D. Kurth, Republican Staff Director and General Counsel
Paul Nagle, Republican Chief Counsel
C O N T E N T S
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Page
Hearing held on April 22, 2008................................... 1
Statement of Senator Dorgan...................................... 2
Statement of Senator Ensign...................................... 6
Prepared statement........................................... 6
Statement of Senator Inouye...................................... 1
Statement of Senator Kerry....................................... 4
Statement of Senator Klobuchar................................... 61
Statement of Senator Pryor....................................... 10
Statement of Senator Rockefeller................................. 8
Statement of Senator Smith....................................... 11
Prepared statement........................................... 11
Statement of Senator Stevens..................................... 12
Statement of Senator Sununu...................................... 3
Statement of Senator Thune....................................... 9
Statement of Senator Wicker...................................... 29
Witnesses
Bateman, Justine, Actress, Writer, Producer, and Co-Founder,
FM78.tv........................................................ 41
Prepared statement........................................... 43
Combs, Michele, Vice President of Communications, Christian
Coalition of America........................................... 30
Prepared statement........................................... 31
Hahn, Robert W., Executive Director, Center for Regulatory and
Market Studies, American Enterprise Institute.................. 33
Prepared statement........................................... 34
Lessig, Lawrence, C. Wendell and Edith M. Carlsmith Professor of
Law, Stanford Law School....................................... 51
Prepared statement........................................... 52
Martin, Hon. Kevin J., Chairman, Federal Communications
Commission..................................................... 13
Prepared statement........................................... 15
McSlarrow, Kyle, President and CEO, National Cable &
Telecommunications Association................................. 44
Prepared statement........................................... 45
Verrone, Patric M., President, Writers Guild of America, West.... 38
Prepared statement........................................... 40
Appendix
Cantwell, Hon. Maria, U.S. Senator from Washington, prepared
statement...................................................... 65
Response to written questions submitted to Justine Bateman by:
Hon. Jim DeMint.............................................. 73
Hon. Byron L. Dorgan......................................... 72
Response to written questions submitted to Dr. Robert Hahn by:
Hon. Daniel K. Inouye........................................ 69
Hon. Olympia J. Snowe........................................ 70
Hon. Ted Stevens............................................. 70
Response to written questions submitted to Hon. Kevin J. Martin
by:
Hon. Byron L. Dorgan......................................... 66
Hon. Olympia J. Snowe........................................ 67
Hon. Ted Stevens............................................. 67
Response to written questions submitted to Professor Lawrence
Lessig by:
Hon. Maria Cantwell.......................................... 85
Hon. Jim DeMint.............................................. 87
Hon. Byron L. Dorgan......................................... 84
Hon. Daniel K. Inouye........................................ 84
Hon. Amy Klobuchar........................................... 86
Hon. Olympia J. Snowe........................................ 86
Response to written questions submitted to Kyle McSlarrow by:
Hon. Maria Cantwell.......................................... 75
Hon. Jim DeMint.............................................. 80
Hon. Daniel K. Inouye........................................ 74
Hon. Olympia J. Snowe........................................ 77
Hon. Ted Stevens............................................. 76
Response to written questions submitted to Patric Verrone by:
Hon. Jim DeMint.............................................. 71
Hon. Byron L. Dorgan......................................... 71
THE FUTURE OF THE INTERNET
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TUESDAY, APRIL 22, 2008
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 10:06 a.m. in
room SR-253, Russell Senate Office Building, Hon. Daniel K.
Inouye, Chairman of the Committee, presiding.
OPENING STATEMENT OF HON. DANIEL K. INOUYE,
U.S. SENATOR FROM HAWAII
The Chairman. The Internet is one of the great success
stories of the 20th century. It has been a key factor in the
ability of the United States to steadily improve worker
productivity for the past 15 years. Our economy and the quality
of our lives have evolved significantly because of this network
of networks.
The Internet has created an era of transparency, making it
even harder for the corporations and governments to escape
scrutiny for actions that do not stand up to the light of day.
Again, I would suggest that, because of this expanded flow of
information, our Nation is much stronger.
The Internet has also brought together communities of like-
minded individuals who share an interest in a hobby, in a
unique culture, or in saving a few dollars when shopping for
their families. In a country that is defined by its very
diversity, I would suggest that this capacity to bring people
together serves us well.
Along with the great benefits, the Internet, unfortunately,
has provided a new avenue for those who would seek to take
advantage of the fellow citizens. Identity theft, violations of
intellectual property rights, and any number of good old-
fashioned scams have been updated to the Digital Age, and we
continue to struggle with the best way to protect our children
from inappropriate content and inappropriate contact with those
who would do them harm.
Along with the problems facing individual Americans as they
navigate the digital world, there are also challenges facing
those who provide services and contact via the Internet and
those who build and manage the network infrastructure necessary
for the continued expansion and improvement of the Internet.
I believe that the government has a responsibility to
create a regulatory environment that will 1 day enable each and
every American to have affordable access to reliable broadband
service.
To achieve this long-term goal, I've introduced the
Broadband Data Improvement Act. This act is designed to give us
a starting point. It will better define what ``broadband'' is,
and it will provide us with accurate information on the current
status of broadband deployment in the United States. This
information is essential toward universal broadband deployment.
Another significant responsibility of our government is to
ensure that the Internet continues to grow and thrive. The
issue of network neutrality and its offspring,
nondiscrimination and network management, looms large in this
debate. The central question here seems to be how to best
balance the right of the American people to uncensored and
unfettered access to Internet content and services against the
desire of the Internet service providers to manage their
networks in an efficient, profitable way.
For several years now, policy discussions on this subject
have been waged on a rhetorical battlefield. We are told that
nothing less than the future of the Internet is at stake. Yet,
even in this winner-take-all environment, we see the inklings
of progress, the dialogue between cable and peer-to-peer
services, the novel open-access requirements on the C-block
spectrum, and the swift response of a wireless provider to a
text-messenging snafu that thwarted political speech.
It may be early for optimism, but progress deserves praise.
In the meantime, I can assure you that this committee will
continue to vigorously exercise its oversight authority over
this important issue.
And may I now recognize the Vice Chairman of the Committee,
Senator Stevens.
Senator Stevens. Well, since I came in late, I'll yield to
my friends and come back later. OK?
The Chairman. Then, may I call upon Senator Dorgan?
STATEMENT OF HON. BYRON L. DORGAN,
U.S. SENATOR FROM NORTH DAKOTA
Senator Dorgan. Mr. Chairman, thank you very much. First of
all, thanks for holding this hearing.
As you know, Senator Snowe and I have introduced a piece of
legislation, the Internet Freedom Act. And I want to mention,
at the start of this hearing, that the creation and the
development of the Internet is a remarkable thing in our lives,
and it occurred under rules of nondiscrimination. It is an open
architecture. The Internet has been completely open in its
architecture. Anyone can go anywhere, anytime, under any
circumstances, no gatekeepers, no tollbooths. And you also
know, and we know, that there are those who have said, as this
Internet has developed, that they would like to find ways to
create tolls. And I've often quoted AT&T's old CEO, Ed
Whitacre, who told Business Week, quote, ``They don't have any
fiber out there, they don't have any wires, they don't have
anything. They use my lines for free, and that's bull.'' Well,
he is suggesting, there, as others have, that they will want to
at some point, as providers, begin finding other streams of
revenue, and doing that by establishing various tiers and so
on, and they can do that if there are not rules against
discrimination.
My feeling is that innovation in the Internet will be
stifled dramatically--innovation in our country will be
stifled--unless we restore the nondiscrimination rules.
Mr. Martin will testify today--the Chairman of the FCC--
that the four principles they have are principles he believes
probably reaches something close to nondiscrimination. It's
very interesting that we were told previously in these
discussions that we didn't need to restore nondiscrimination
rules because the FCC would be able to resolve this. Now, in a
filing to the FCC, one of the largest providers in the country
alleges the FCC does not have the authority. So, I think that,
in itself, raises the question of, Why on earth should Congress
not act to restore the nondiscrimination rules under which the
Internet was created in the first instance? That is the purpose
of the piece of legislation that I and Senator Snowe have
introduced.
I know this is a controversial issue, but it certainly
should not be. When should it be controversial to decide that
there shall be nondiscrimination? I mean, those that oppose
this apparently have to be taking the side, ``We want to permit
discrimination, in one form or another.'' That's a preposterous
position, in my judgment. My hope is that this hearing will
give us additional information with which to evaluate this
issue and then pass our legislation.
The Chairman. I thank you very much.
Senator Sununu?
STATEMENT OF HON. JOHN E. SUNUNU,
U.S. SENATOR FROM NEW HAMPSHIRE
Senator Sununu. Thank you very much, Mr. Chairman.
I'm obviously looking forward to the testimony of the
witnesses. I agree with many of the previous statements,
certainly one that--the one that the Internet's a remarkable
thing. I think we can all agree with that. But, I find the
title of the hearing, ``The Future of the Internet,'' at least
somewhat interesting, in that if the Internet's taught us
anything, it's that it's pretty presumptuous to predict what
its future will be. And we don't have to look much further than
the ground that's littered with, sort of, the corpses of dot-
com businesses, 2001, 2002, 2003, and, from that, competitive
destruction. We've seen a lot of growth and innovation in
Internet-based services, content distribution, greater and
greater deployment of fiber and methodology, wireless systems
for distributing and providing customers with access to
broadband. But, even so, this is an industry and a technology,
an infrastructure that is in its infancy, and we should be
very, very cautious about imposing regulations based on what we
think competitors will do in the future and how we think
consumers will respond when competitors do things that we think
they might do. That is not the basis for sound regulation.
If there are anticompetitive practices that we can
identify, we should act. And we already have a lot of statutes
in existing law to deal with anticompetitive practices. If
people aren't properly disclosing the way they operate and what
they're doing to content, blocking access to Websites without
disclosing that, I don't think we should do that in any case,
but if people are acting in a way that misleads consumers, we
should act. And we have the power to act.
But, writing regulations based on how we think competitors
might behave and how we predict customers might act and respond
to that behavior is dangerous, indeed, because what we risk
doing is enacting regulations that guarantee that the Internet
will always look like what it used to look like, and I don't
want the Internet to be locked in to 2008 or 2005 or 2001 or
1996, when we--when others wrote the Telecom Act that set the
groundwork for a lot of what we're doing today. We need to let
people innovate, let people invest, be on guard for practices
that deny consumers access, that deny consumers benefit, that
stifle innovation. But, we shouldn't base regulation on the
predictions of politicians, certainly, or even those in
industry, necessarily, because we've seen, time and time again,
that some of those that we determine to be the most brilliant
in industry today turn out to be foolish in their investments
in their prediction of where technology is headed.
Thank you, Mr. Chairman.
The Chairman. I thank you very much.
Senator Kerry?
STATEMENT OF HON. JOHN F. KERRY,
U.S. SENATOR FROM MASSACHUSETTS
Senator Kerry. Thank you, Mr. Chairman. And thank you for
holding this hearing on this really important issue.
And I want to thank Chairman Martin for coming aboard, at
the last moment here, to join us, which I think is really
important, and we appreciate it.
And we also appreciate all of the other witnesses who have
traveled to Washington in order to share thoughts with us on
this today.
This is an issue on which there have been a lot of words
expended, a lot of platitudes and politics, and I suppose it's
almost cliche now, Mr. Chairman, to say that, you know, the
Internet is the future. I listened to my colleague from New
Hampshire, just now, talking about, you know, how we shouldn't
get in the way of this competition, et cetera. But, in recent
years, frankly, policy has received too little attention.
And, you know, all of us do know how extraordinary the
story of the Internet is, the capacity it has to foster
innovation, to serve as a forum for unfettered social and
political discourse, and to allow for an extraordinary
dissemination of information and knowledge in the country. But,
frankly, you know, anyone still wondering whether our long-term
and national investment in basic science and technology, which
we talk about a lot in this Committee, is worth it, gets their
answer every single day when they simply log in to check their
e-mail and really take for granted something that began nearly
40 years ago as a DARPA experiment. And those of us sitting on
this Committee when we wrote the 1996 Telecommunications Act
will all remember that we were way behind the curve, in the
sense that the entire discussion here was about telephony, not
data, and within 6 months, almost, that Act was bypassed. But
as the Internet, through its own freedom, its own ability to
innovate, through the open architecture and the platform that
has allowed this extraordinary innovation, as it has grown and
become pervasive in our lives, the fact is that the debate over
the need to ensure some very basic principles--principles, not
nit-picking, you know, regulatory structure, but basic
principles about how and when network providers can manage
content is becoming more and more politicized and polarized.
During the last go-around on this issue, in 2006, we were
told by the major cable and phone companies that net neutrality
was, quote, ``a solution in search of a problem, a response to
blocking and interference with Internet content which no
network operator would ever attempt.'' That's what we were
told.
I listened to my colleague from New Hampshire, just now,
tell us, you know, ``Don't get in the way of something that
isn't happening or that might change the things that we can't
predict.'' But, it's not a question of changing something we
can't predict; it's happened. It has happened.
On the heels of this claim, before this Committee, we found
out that AT&T censored politically charged words during a live
broadcast of Pearl Jam concert in August 2007. A month later,
Verizon rejected a request made by NARAL to use the network for
text-messaging political content. And, finally, in October of
2007, Comcast admitted--and you have to sort of look at the
sequence of their statements. You know, it's interesting, if
you follow them, because ultimately what they told us again
they weren't doing, it was proven they were doing. And they
admitted to interfering with a subscriber's attempts to share
files online using BitTorrent technology.
So, to whatever degree people were alleging, Mr. Chairman,
that this was a solution in search of a problem, it has found
its problem. And we have an obligation to try to guarantee that
the same freedom and the same creativity that was able to bring
us to where we are today continues as we forward.
Now, even though I want to acknowledge, the companies that
I've just mentioned appropriately took steps to address each of
these issues. And we applaud that, ad we appreciate their
response. But, we can't expect, nor should the American people,
the users of this incredible technology, expect that we have to
rely on a discretionary and occasional political pressure or
scrutiny from Congress, or from the FCC, or a vocal and
organized group of advocates, in order to regulate the
industry. That ought to happen because we have a set of
standards and expectations in place. And I think Senator
Dorgan's bill, which I'm a cosponsor of, is the approach that
makes sense.
I also appreciate that the FCC is looking closely at this
issue, held hearings in Cambridge and last week, in Palo Alto.
And I hope that they're going to see fit to act in a way that
will protect these open networks.
The cable companies and the phone companies, Mr. Chairman,
tell us that, because of capacity restraints, there's a need
for some level of reasonable network management. And there is
an aspect to this claim that can ring true on the surface, but
I think that is something of a cautionary claim, and we ought
to put it to the test today, and take notice that you can
establish a set of principles that don't violate that ability.
One other point I'd like to make, Mr. Chairman. Despite the
fact that the Internet was born in this country, and this
Committee has presided over its growth, America has been in a
precipitous free-fall when it comes to our global broadband
ranking. And this is just--it's not only disgraceful and
unacceptable, it's just--it defies any kind of rational
approach to the economy that we have in this country, and want
to have in the future.
The Organization for Economic Cooperation and Development
has dropped the United States from fourth to fifteenth in
broadband rankings of industrialized nations. The International
Telecommunications Union ranks the United States 21st, tied
with Estonia, in its digital opportunity index. The debate over
net neutrality and America's global broadband ranking are
linked, and I think it's important that we discuss the link.
When we talk about reasonable network management, we're
also talking about the concept of scarcity. We lack the
infrastructure to deliver highspeed broadband to every
household, and the public's demand for content, such as video
streaming, is exceeding the ability to deliver it.
More than 3 years ago, 4 years ago now, actually, the
President told us this country needed, and would have, a
broadband strategy, a plan, by 2007. Well, it's 2008, and we
are legitimate in asking the question, Where is the plan? Where
is the sense of urgency? Entire swaths of our country,
including most of the western part of Massachusetts, have
little or no access to broadband, and we're placing our
businesses and workers at a huge economic disadvantage every
day because of this, Mr. Chairman.
So, I hope we're going to start implementing the large-
scale public investment for broadband, the incentives that we
need to put in place, so that we can have universal broadband
in America, and we need to pass legislation, like your
Broadband Data Improvement Act, so we can get the kind of
accurate data we need to know exactly what we're up against. I
hope our witnesses this morning will share with us thoughts
about that linkage and its importance as we proceed forward.
Thank you, Mr. Chairman.
The Chairman. I thank you very much.
And, Senator Ensign?
STATEMENT OF HON. JOHN ENSIGN,
U.S. SENATOR FROM NEVADA
Senator Ensign. Thank you, Mr. Chairman.
I would ask that my full statement be made part of the
record----
The Chairman. Without objection.
Senator Ensign.--and I'll just try to summarize, with a
couple of points.
[The prepared statement of Senator Ensign follows:]
Prepared Statement of Hon. John Ensign, U.S. Senator from Nevada
Thank you, Mr. Chairman and Vice-Chairman Stevens for calling this
hearing today on an issue that is very important to me, the future of
the Internet. As you know, the Internet has become an indispensable
part of our economy and an integral part of our society. It is a source
of innovation, information, entertainment, new wealth, and
communication. Every American's life has somehow been touched and made
better by the Internet in some way, and it only becomes more ubiquitous
and vital as it matures.
Largely unfettered by government laws and regulations, the Internet
owes much of its success to innovators and entrepreneurs having the
freedom to imagine, explore, and create new uses for the Internet. This
openness has flourished without the heavy hand of government
intervention, although the continued preservation of the Internet's
openness is at the core of the network neutrality debate. Perhaps no
issue is more contested or more central to the Internet's future than
this one.
I continue to believe that the competitive market will be the best
steward of the Internet's famed openness, as it has been since the
Internet was first opened to the public. Businesses must be able to
freely determine how best to provide their content or services to
users. Internet service providers must be allowed to reasonably manage
their networks to ensure the best possible experience for users. We
must avoid burdensome government regulations that micro-manage network
operators or that limit the ability of companies to provide what their
customers want and need. Such intervention could stifle the dynamic
marketplace that has given us fiber-to-the-home networks, search
engines putting the information of the world at our fingertips,
wireless broadband devices, and streaming on-demand high definition
video.
Even so, government does have a significant role to play in guiding
the future of the Internet. Most observers agree that if there was more
competition for broadband access the network neutrality issue would be
rendered all but moot. Rather than imposing new government mandates
that could reduce the private sector's investment in our Nation's
broadband infrastructure, Congress should work with industry to find
ways to encourage increased capital investment and to promote the entry
of new Internet providers.
A related problem facing network operators is that of increased
congestion, driven in large part by the transmission of pirated
content. Government must work with interested stakeholders to determine
what network management activities are practical, fair, and in the
public interest. Congress' ability to focus attention and shine
sunlight on these issues, like this hearing will do today, will be one
of our most effective tools to foster such cooperation.
Restrictive government mandates and meddlesome regulations are not
the answer to the challenges facing the Internet today. Indeed, such
responses may serve to smother creative new uses for the Internet and
to slow the expansion of advanced broadband networks. The FCC has
adopted a set of broadband policies that seek to preserve openness,
protect against harmful discrimination, and promote innovation. In
conjunction with these worthwhile principles, Congress should also work
to ensure that Internet companies can profit from their endeavors,
protect their investments, and provide better and more responsive
services. I believe these are goals on which we can all agree, and we
must not let partisan politics distract us from the task at hand.
Thank you again, Mr. Chairman, for holding this hearing today. I
look forward to the testimony of our distinguished panel of witnesses.
Senator Ensign. One of the things that we see around this
place, one of the worst laws that I think that we ever pass, is
the law of unintended consequences. We set out trying to do the
right thing, but we end up with severe consequences of things
that we never foresaw.
It is my fear of regulating the Internet that this law of
unintended consequences will come up to bite us very, very
severely specifically because of some of the things that my
colleague Senator Sununu talked about--is that we can't
predict--the technology is changing so fast, entrepreneurs are
out there, coming up with different ways of doing things on the
Internet, and what the Internet is going to look like 5 years
from now, there isn't anybody in America who can predict that.
And if they have somewhat of a guess that--they'll be
multigazillionaires if they're able to predict what it's going
to look like.
But, when you look at--when we should regulate, when the
government should be looking at regulating is mainly when
market forces aren't working, when the market forces aren't
allowing for competition. Regulation is basically to protect
consumers. If the market isn't doing an efficient job of that,
a lot of times it's time for government to step in. In every
one of the cases that my colleagues have talked about,
especially Senator Kerry, the market forces corrected it. He
admitted that. Every single one of the cases that he talked
about, the companies took action to correct that.
So, I think that we need to be very, very careful as we
proceed with any type of laws or regulations dealing with the
Internet. And I think the FCC would also be well advised to be
very, very cautious in anything that they bring forward.
And so, I appreciate Chairman Martin being here today,
because what we are dealing with can have some fairly profound
consequences on the future of commerce in the United States. We
want to be--I agree with--by the way, with Senator Kerry about
us, you know, not having the deployment of broadband in the
United States that we should have. I would say that if we would
have passed my bill from a couple of years ago, we would have a
lot better deployment of broadband in the United States, but
that's another story for another day.
The bottom line is, this Committee--I think one of the
important parts of this Committee is to bring out things that
may be happening in the marketplace so that we don't have to do
regulation. A lot times, one the greatest powers that we have
as Senators is the power to convene, the power to shine light
in places, and to bring out--to make sure that there is
transparency. And in a lot of cases, when you do that, you
don't need to regulate, because just the threat of regulation
can make the market do the right thing.
And so, I think it's important that we're very, very
cautious, because once regulations are put into place, once
laws are put into place, they're very difficult to change. So,
we ought to be very, very cautious as we proceed, and making
sure that if the market is correcting itself, that we ought to
allow the market to do its job.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Rockefeller?
STATEMENT OF HON. JOHN D. ROCKEFELLER IV,
U.S. SENATOR FROM WEST VIRGINIA
Senator Rockefeller. Thank you, Mr. Chairman. I'll try to
be brief.
I'm glad of this hearing. Chairman Martin, I'm happy to see
you. You're not looking very cheerful right now, and you
usually do, so I want you to be glad that you're here.
So, ``The Future of the Internet''--lofty title, lots of
things implied. I think it's useful to look forward. It's also
useful to look back. I want to do that.
Forty years ago, as John Kerry said, DARPA--and it was the
``network of networks,'' that's what it was called at that
time, and later became the Internet. The Internet started with
the Government, as today the relationship between Internet and
the government continues. In fact, I believe it is a myth that
the Internet is not regulated. It is regulated, in a variety of
ways. We have rules to protect consumers against the nuisance
of unwanted e-mail solicitation or spam, we require voice
communications providers that use the Internet to offer 9-1-1
emergency service to their users, we require providers of these
services to support our Universal Service policy. We have
programs that put the Internet in our schools, programs to
support the use of telemedicine, and laws that seek to
diversify the range of broadband Internet service providers.
So, in short, Congress--we do pay attention to the
lifeblood of the Internet, and we should. We want to foster an
environment where it can grow and thrive and where the core
values that have always driven our communications policy--and
there are three: consumer protection, universal deployment, and
competition--continue to propel us forward into the Internet
Age even farther.
So, this is what I see at issue in the future of the
Internet. Will we take these values and see to it that they
inspire the next generation of great innovation? Will we
squander them with a misguided notion that all is well--we can
do that if we want--and that the unfettered market will serve
the interests of our largest businesses and our individual
consumers alike?
Taking the matter of broadband, that Senator Kerry was
talking about, I am frustrated beyond any description by the
lack of it in so many parts of a, granted, very rural and
difficult State of West Virginia. I, for one, am very worried.
The Internet and broadband represents our next great
infrastructure challenge. It's on a par with the interstate
roads, railroads, port projects that defined our commerce in
the last century. But, we have yet to treat the deployment of
broadband with any kind of seriousness that it deserves its
spotty, industrial, you know, high return, and then
occasionally somebody throws out, ``Well, we'll put it in this
rural county,'' and I can't buy that. I simply can't buy that.
The world is passing us by, building more robust systems with
greater bandwidth, more possibilities for education,
entertainment, and entrepreneurship. This is not something to
be proud of in this country. The time has come for a different
discussion, a discussion that recognizes the viable role of the
government in ensuring open broadband networks for all of our
citizens, a discussion that brings along with it the prospect
of real consumer protection, a discussion that truly fosters
competition, and a discussion that ensures that the Internet
will remain a creative source that takes inspiration and
benefits from the great genius of our citizens.
I think we have a lot of work to do on this. I look forward
to it. And I thank the Chair.
The Chairman. Thank you very much.
Senator Thune?
STATEMENT OF HON. JOHN THUNE,
U.S. SENATOR FROM SOUTH DAKOTA
Senator Thune. Thank you, Mr. Chairman and Mr. Vice
Chairman, for calling today's hearing on the future of the
Internet, or, more specifically, the outlook for additional
regulation on network providers.
Without question, the Internet's become an essential part
of most Americans' daily lives. In fact, just a few years ago,
individuals and businesses used the Internet to simply exchange
information over e-mail and to post information on static
Websites. Today, advances in technology and broadband
deployment has led to an online revolution and transformed the
role of the Internet in our everyday lives.
Peer-to-peer networking, iTunes, YouTube, and downloading
HD videos were hardly envisioned just a few years ago. And by
2010, the average household will be using 1.1 terabytes of
bandwidth each month, which, incidentally, Mr. Chairman, is an
amount equal to 1,000 copies of the Encyclopedia Britannica. At
that rate, just 20 homes would account for more bandwidth than
the entire Internet in 1995.
Now, throughout this period of exceptional innovation,
there's been very little regulation on the Internet. At this
time, and by most accounts, the Internet is thriving. In
several respects, the light regulatory touch of the Federal
Government, as succeeded. Revenues from Internet sales of goods
and services have grown to more than $135 billion in 2007,
which represents a 20-percent increase from 2006. And, in fact,
in the last year, online video viewing has increased 66
percent. Moving forward, Congress should continue to incentive
broadband access nationwide, with particular emphasis on rural
areas where broadband is essential to economic growth. And
Congress also ought to be promoting investment in innovation in
Internet networks through a variety of business models, and
ensure the free flow of information through advanced networks.
I appreciate the testimony that we're going to receive
today from today's witnesses. Your input on this important
issue is going to be critical and help this Committee adjust
our policies in accordance with the very dynamic Internet
community.
Thank you, Mr. Chairman.
The Chairman. Thank you very much.
Senator Pryor?
STATEMENT OF HON. MARK PRYOR,
U.S. SENATOR FROM ARIZONA
Senator Pryor. Thank you, Mr. Chairman.
Mr. Chairman, last time you offered for me to make an
opening statement and I declined, Senator Sununu came over and
criticized me for not making an opening statement.
[Laughter.]
Senator Sununu. I just wanted to hear from you.
[Laughter.]
Senator Pryor. So, I guess I'm reminded of a saying that
Congressman Marion Berry from Arkansas has, where he says,
``Everything has been said, but not everybody has said it.''
And I think that----
[Laughter.]
Senator Pryor.--the opening statements that we all have
made today really cover the issues I want to talk about.
But, I do want to thank Chairman Martin for coming in. It's
always great to have you before the Committee. And, Chairman
Martin, I want to especially thank you for the courtesy visit
that we had several days ago, and I just appreciate the tasks
and the challenges you have there, and look forward to hearing
your thoughts on the future of the Internet. And, obviously,
rural broadband is very, very important to many of us on this
Committee, and I look forward to hearing your thoughts on that.
Thank you.
The Chairman. Thank you very much.
Senator Smith?
STATEMENT OF HON. GORDON H. SMITH,
U.S. SENATOR FROM OREGON
Senator Smith. Thank you, Mr. Chairman.
In the interest of time, I'll put my longer statement in
the record, with your permission----
The Chairman. Without objection.
Senator Smith.--and my colleagues' assent.
Let me just sum my concerns into three parts. I think the
question, moving forward, is whether the public interest is
served by heavy-handed government regulation or policies that
will empower agencies with the agility and tools to go after
unfair and anticompetitive behavior on the Internet.
It's my belief that innovation and investment are
encouraged through less, rather than more, government
regulation. I also believe that anticompetitive behavior on the
Internet must be met with swift and decisive responses from
Federal agencies charged with policing such conduct. I,
finally, Mr. Chairman, want to emphasize one piece of this
debate that I think we need to keep in mind as the debate moves
forward. I think that intellectual property rights must be part
of any discussions that consider the future of the Internet.
Illegal content distribution over the Internet is a large part
of the economic harm caused by piracy each year.
Thank you, Mr. Chairman, and I'll put the rest in the
record.
The Chairman. Without objection.
[The prepared statement of Senator Smith follows:]
Prepared Statement of Hon. Gordon H. Smith, U.S. Senator from Oregon
Thank you, Chairman Inouye, for holding this important hearing on
the Future of the Internet.
Competitiveness
I think we are all well aware on this Committee that several
nations are now outpacing the United States in broadband deployment.
There are severe economic consequences in failing to keep pace with the
broadband infrastructure being deployed in other parts of the world. If
we do not invest in the broadband, companies will move jobs overseas
where the infrastructure meets their needs in the 21st century.
Innovative technologies will be invented elsewhere. It is vital to our
continued competitiveness in the global marketplace that we have a
frank discussion on our Internet policies today in order to restore our
global leadership in broadband networks tomorrow.
Congress must act now to define a national broadband strategy. At a
minimum this strategy must include: (1) identifying where broadband is
and where it is not; (2) reforming funding mechanisms to support
broadband, (3) maximizing spectrum efficiencies to expedite deployment
of wireless broadband solutions and (4) removing barriers to community
broadband deployment. I am proud to have introduced bi-partisan
legislation that advances each of these objectives.
Net Neutrality
I think we are all also aware on this Committee that it has proved
difficult to enact any real national broadband policies with the
specter of a net neutrality debate looming. My hope is that today's
public discussion on net neutrality will reveal that there is more
common ground here than some folks would suggest and perhaps a path
down which we can proceed for the common good. For instance I think we
could all agree that our Internet policies should:
advance innovation at the edges as well as investment in
networks;
allow for legal peer-to-peer file sharing applications while
strictly safeguarding against the theft of intellectual
property online; and
empower network operators with the freedom to address
increasing congestion in their pipes while rigorously ferreting
out and punishing anticompetitive behavior.
We should settle the debate about the ends and get serious in the
debate about the means--how we go about encouraging broadband
deployment and preserving the open and interconnected Internet. The
question moving forward should be about whether the public interest is
served through heavy handed government regulation, as some have
proposed, or policies that will empower agencies with the agility and
tools to go after unfair and anticompetitive behavior on the Internet.
I continue to believe that innovation and investment are encouraged
through less rather than more government regulation. I also believe
that anticompetitive behavior on the Internet must be met with swift
and decisive responses from the Federal agencies charged with policing
such conduct.
Piracy
Finally, I think that intellectual property rights must be apart of
any discussion that considers the future of the Internet. Illegal
content distribution over the Internet is a large part of the economic
harm caused by piracy each year. In 2005, American workers saw an
estimated 141,000 jobs lost and $5.5 billion in lost earnings as a
result of motion picture piracy. The economy's losses from illegal
music downloading were likewise reported at around $3.7 billion in
2007.
With the Chairman's permission, I would ask that the Motion Picture
Association and the Recording Industry Association comments (that were
filed at the FCC) be made part of the record. These comments focus on
challenges copyright holders face to ensure intellectual property
rights are protected over the Internet.
I welcome panelists here today and thank you for your testimony.
The Chairman. And now, I call upon the Vice Chairman.
STATEMENT OF HON. TED STEVENS,
U.S. SENATOR FROM ALASKA
Senator Stevens. Thank you, Mr. Chairman.
I would like to welcome Chairman Martin. I think it's very
important, particularly--we look forward to hearing some
comments concerning your meetings in Harvard and Stanford.
Senator Kerry said that this is a problem seeking a
solution, but from my point of view, this is a solution seeking
some justification. And I certainly hope that the FCC, as well
as the Congress, are very careful about taking this first step
of going back to really intense--intensive regulation of the
Internet. That's what ``net neutrality'' means to me.
Eventually, there would be extension of regulation to the point
where it would be, really, interference with the dynamics of
the Internet and its future.
I do believe that there are many comments out there. For
instance, I'd like to file, for the record, the article
entitled, ``Network Neutrality and the False Promise of Zero-
Priced Regulation,'' by C. Scott Hemphill and a group of very
erudite people at Columbia.*
---------------------------------------------------------------------------
\*\ The document is retained in Committee files and also can be
found at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1119982.
---------------------------------------------------------------------------
And it does seem to me that this public discussion that's
going on is good for the system. But, to take action based on
it, either by the Congress or by the FCC, at this time, I
think's entirely unwarranted. The action that Senator Kerry
mentioned, that was called to attention, the public
indignation, the outcry from the industry showed that the
system will right itself if someone really tries to interfere
with the free access and, really, fair treatment of everyone
using the Internet. So, I do not believe that this is a time to
try to put in a law or into a regulation a concept of net
neutrality that is not validated yet. If something comes along
that really deserves such attention, it will be broad enough
and a great enough incentive for us to stop this political
division over the concept of net neutrality. It is a political
division now, and it's getting more so. It's unfortunate,
because I do not think that communications law ought to come
about because of political division in an election year.
Thank you very much.
The Chairman. Thank you very much.
Mr. Chairman, you've heard a full spectrum of views of the
Committee. Now it's your turn, sir.
Chairman Martin?
STATEMENT OF HON. KEVIN J. MARTIN, CHAIRMAN,
FEDERAL COMMUNICATIONS COMMISSION
Mr. Martin. Well, thank you. And good morning, Chairman
Inouye, and Vice Chairman Stevens, and all the members of the
Committee. I appreciate you allowing me to testify before you
today.
I thought it important to update the Committee on the work
in progress of the Commission with respect to the future of the
Internet, particularly after our en banc hearing on the issue,
just last week.
Over the past decade, the Internet has had a powerful
impact on the economy and on the lives of American citizens. We
witnessed the fruits of increased innovation, entrepreneurship,
and competition that this technology has helped deliver. Any
rules of the road in this area must maintain an open and
dynamic Internet, preserving it as an engine of productivity
and innovation that benefits all Americans.
The Commission is obligated to preserve and promote the
vibrant and open character of the Internet. In 2005, the
Commission adopted an Internet policy statement containing four
key principles. The goal was to clarify how we would evaluate
broadband Internet practices on a going-forward basis.
Specifically, the statement says that, ``To encourage broadband
deployment and preserve and promote the open and interconnected
nature of the public Internet, consumers are entitled to access
the lawful Internet content of their choice; consumers are
entitled to run applications and use services of their choice,
subject to the needs of law enforcement; consumers are entitled
to connect their choice of legal devices that do not harm the
network; and consumers are entitled to competition among
network providers, application service providers, and content
providers. Now, the Commission explicitly noted that these
principles allow for reasonable network management.
As the expert communications agency, it was appropriate for
the Commission to adopt, and it is the Commission's role to
enforce, this Internet policy statement. The Supreme Court, in
its Brand X decision, specifically recognized the Commission's
authority to adopt regulations to protect broadband Internet
access.
I do not believe any additional regulations are needed at
this time, because we have a complaint and adjudication
process, but I do believe that the Commission has the
responsibility to enforce the principles that it has already
adopted. Indeed, on several occasions, the entire Commission
has reiterated that it has the authority and will enforce these
current principles.
For example, in 2006, when I appeared before this
committee, then-Chairman Stevens asked me whether the
Commission had the existing authority to take action if a
problem developed, and I responded that the Commission had
authority, under Title I, to enforce consumers' unfettered
access to the Internet when, one year ago, the Commission
committed to enforcing our existing principles--specifically,
the Commission stated that, quote, ''The Commission, under
Title I, of the Communications Act, has the ability to adopt
and enforce the net neutrality principles it announced in the
Internet policy statement.`` In fact, we have already taken
enforcement action in response to other complaints. In the
Madison River complaint, the Commission ordered a telephone
company to stop blocking Voice-over-IP calls.
The Commission should address issues of appropriate network
management using a consistent framework. There are several
factors that I believe the Commission should consider:
First, the Commission should consider whether the network
management practices are intended to distinguish between legal
and illegal activity. The Commission's network principles only
recognize and protect a user's access to legal content. The
sharing of illegal content, such as child pornography or
pirated material, is not protected. Similarly, applications
that are intended to harm the network are not protected.
Second, the Commission should consider whether the network
service provider has adequately disclosed its network
management practices. A hallmark of whether something is
reasonable is whether an operator is willing to precisely and
fully disclose what it is they are doing. Application designers
need to understand what will and will not work on a particular
network, and consumers must be fully informed about the exact
nature of the service they are purchasing, and any potential
limitations on that service. For example, has the consumer been
informed that certain applications used to watch video will not
work properly when there is high congestion?
Additionally, consumers need to be assured that the
broadband network operators are able to deliver the speeds of
service that they are purchasing, and that if Internet access
is sold as an unlimited service, do consumers understand that
if they use too much of it, they can still be cutoff?
Now, finally, I believe the Commission should consider
whether the network management technique arbitrarily blocks or
degrades a particular application. Is the network management
practice selectively identifying particular applications or
content for differential treatment? If so, I believe we should
evaluate these practices with heightened scrutiny. The network
operators should bear the burden of demonstrating that the
practice furthers an important interest and is narrowly
tailored to serve that interest. Such an approach would not
mean that any action taken against a particular application
would automatically be a violation. Rather, it would trigger a
more searching review of both the particular concern and
whether the network management solution was tailored to resolve
that concern in as narrow a manner as possible. Such practices
should not be overly broad in their application so that they
become over- or under-inclusive. For example, if the concern is
about stopping illegal content, a network provider should not
block a particular application to all users if that application
transmits both legal and illegal content. Rather, it should
filter all of the illegal content and permit the flow of
material that is legal.
An analysis considering the factors I've identified would
recognize the importance of legitimate network management
techniques while providing a framework to analyze whether
carriers' actions are reasonable on a case-by-case basis.
Now, consumers have recently alleged that certain
operators--and specifically, Comcast--are blocking and/or
degrading consumers' access to the Internet by targeting
specific peer-to-peer applications. The Commission is still
investigating these complaints, and we have not yet determined
whether the actions violated our principles protecting consumer
access to the Internet. At our hearings in Boston and Stanford,
we heard from several engineers and technical experts.
According to the testimony at those hearings, Comcast appears
to have utilized Internet equipment that blocks certain
attempts by subscribers to upload information using particular
legal peer-to-peer applications by pretending to be the
subscriber's computer and falsifying a reset packet to end that
communication. It also degrades the corresponding attempts to
download information using the same peer-to-peer applications.
Specifically, based on the testimony we have received thus far,
some users were not able to upload any content that they
wanted.
It does not appear that this technique was used only to
occasionally delay traffic at particular nodes suffering from
network congestion at that time. Indeed, based on the testimony
we have received thus far, this equipment was typically
deployed over a wider geographic area or system, and it is not
even capable of knowing when an individual cable segment of the
network is congested. This equipment blocks uploads of a
significant portion of subscribers in that part of the network,
regardless of the actual levels of congestion at that
particular time.
Now, as the Commission continues its examination of the
complaints before it, it's critically important to make sure
that we are fully informed, and we need to fully understand
what impact the operators' actions are having on consumers'
broadband experience so that we may better evaluate the
reasonableness of any network management practice.
Thank you, again, for the opportunity to be here, and I
look forward to answering any questions that you might have.
[The prepared statement of Mr. Martin follows:]
Prepared Statement of Hon. Kevin J. Martin, Chairman,
Federal Communications Commission
Good morning, Chairman Inouye, Vice Chairman Stevens, and members
of the Committee. Thank you for inviting me here today to provide my
thoughts on the future of the Internet and the Commission's current
role on some of the issues being discussed today.
Over the past decade, the Internet has had a powerful impact on the
economy and on the lives of American citizens. We have witnessed the
fruits of increased innovation, entrepreneurship, and competition that
this technology has helped deliver. As policymakers, any rules of the
road in this area must maintain an open and dynamic Internet that will
allow it to continue to be an engine of productivity and innovation
that benefits all Americans.
I. FCC Principles Protecting Consumer Access to the Internet
The Commission has a duty to preserve and promote the vibrant and
open character of the Internet as the telecommunications marketplace
enters the broadband age. In 2005, the Commission adopted an Internet
Policy Statement containing four principles. The Commission's goal was
to clarify how it would evaluate broadband Internet practices on a
going forward basis.
Specifically, the Commission established the following principles:
To encourage broadband deployment and preserve and promote the open
and interconnected nature of the public Internet,
Consumers are entitled to access the lawful Internet content
of their choice;
Consumers are entitled to run applications and use services
of their choice, subject to the needs of law enforcement;
Consumers are entitled to connect their choice of legal
devices that do not harm the network;
Consumers are entitled to competition among network
providers, application and service providers, and content
providers.
The Commission explicitly noted that these principles were subject
to reasonable network management.
The Commission was seeking to protect consumers' access to the
lawful online content of their choice. The intent of these principles
was to foster the creation, adoption and use of broadband Internet
content, applications, and services, and to ensure that consumers
benefit from that innovation.
II. FCC's Role in Protecting Consumers and Enforcing Our Principles
As the expert communications agency, it was appropriate for the
Commission to adopt, and it is the Commission's role to enforce, this
Internet Policy Statement.
In fact, the Supreme Court in its Brand X decision specifically
recognized the Commission's ancillary authority to impose regulations
as necessary to protect broadband Internet access.
I do not believe any additional regulations are needed at this
time. But I also believe that the Commission has a responsibility to
enforce the principles that it has already adopted. Indeed, on several
occasions, the entire Commission has reiterated that it has the
authority and will enforce these current principles.
For example, in 2006 when I appeared before this Committee, then
Chairman Stevens asked me whether the Commission had the existing
authority to take action if a problem developed. And I responded that
the Commission had authority under Title I to enforce consumers' access
to the Internet.
Moreover, almost exactly 1 year ago, the Republican Majority of the
Commission, with the Democrat Commissioners concurring, committed to
enforcing our existing principles and the policy statement.
Specifically, in April 2007, the Commission expressly stated:
The Commission, under Title I of the Communications Act, has
the ability to adopt and enforce the net neutrality principles
it announced in the Internet Policy Statement. The Supreme
Court reaffirmed that the Commission ``has jurisdiction to
impose additional regulatory obligations under its Title I
ancillary jurisdiction to regulate interstate and foreign
communications.'' Indeed, the Supreme Court specifically
recognized the Commission's ancillary jurisdiction to impose
regulatory obligations on broadband Internet access
providers.\1\
---------------------------------------------------------------------------
\1\ Broadband Industry Practices, WC Docket No. 07-52, Notice of
Inquiry, 22 FCC Rcd 7894, 7896, para. 4 (2007) (internal footnotes
omitted).
Finally, the Commission has already taken enforcement action in
response to other complaints. In the Madison River complaint, the
Commission ordered a telephone company to stop blocking VoIP calls.
Contrary to some public claims about Commission's approach
generally, for the Commission to take enforcement action against a
telephone company for blocking and degrading a particular application
but refuse to pursue enforcement action against a cable company
blocking or degrading a particular application would unfairly favor the
cable industry.
I believe that the Commission must remain vigilant in protecting
consumers' access to content on the Internet Thus, it is critically
important that the Commission take seriously and respond to complaints
that are filed about arbitrary limits on broadband access and potential
violations of our principles. Indeed, I have publicly stated that the
Commission stands ready to enforce this policy statement and protect
consumers' access to the Internet.
III. Framework for Evaluating Reasonable Network Management
Complaints
The Commission should address issues of appropriate network
management using a consistent framework. There are several factors that
I believe the Commission should use when analyzing complaints and
concerns about network management practices by broadband operators.
First, the Commission should consider whether the network
management practices are intended to distinguish between legal and
illegal activity. The Commission's network principles only recognize
and protect user's access to legal content. The sharing of illegal
content, such as child pornography or content that does not have the
appropriate copyright, is not protected by our principles. Similarly,
applications that are intended to harm the network are not protected.
Second, the Commission should consider whether the network service
provider adequately disclosed its network management practices. A
hallmark of whether something is reasonable is whether an operator is
willing to disclose fully and exactly what they are doing.
Adequate disclosure of the particular traffic management tools and
techniques--not only to consumers but also to the designers of various
applications and entrepreneurs--is critical.
Application designers need to understand what will and will not
work on a particular network. For example, does an application
developer know that the operator may actually insert reset packets
during a session masking the network operator's identity?
Consumers must be fully informed about the exact nature of the
service they are purchasing and any potential limitations associated
with that service. For example, has the consumer been informed that
certain applications used to watch video will not work properly when
there is high congestion?
Particularly as broadband providers begin providing more complex
tiers of service, it's critical to make sure that consumers understand
whether broadband network operators are able to deliver the speeds of
service that they are selling. For example, if Internet access is sold
as an unlimited service, do consumers understand that if they use too
much of it they can still be cutoff?
Finally, the Commission should consider whether the network
management technique arbitrarily blocks or degrades a particular
application. Is the network management practice selectively identifying
particular applications or content for differential treatment? If so, I
believe that we should evaluate the practices with heightened scrutiny,
with the network operator bearing the burden of demonstrating that the
particular practice furthered an important interest, and that it was
narrowly tailored to serve that interest.
Such an approach would not mean that any action taken against a
particular application would automatically be a violation. Rather, it
would trigger a more searching review of both the particular concern
and whether that network management solution was tailored to resolve
the particular harm identified to the network in as narrow a manner as
possible.
In a manner similar to the way in which restrictions on speech are
analyzed, network management solutions would need to further a
compelling or at least an important/legitimate interest and would need
to be tailored to fit the exact interest. Such practices should not be
overly broad in their application so that they become over or under
inclusive. For example, if the concern is about stopping certain
illegal content, a network provider should not block a particular
application to all users if that application transmits both legal and
illegal content.
Such an analysis would recognize the importance of legitimate
network management techniques while giving the Commission the framework
to analyze carriers actions on a case-by-case basis. As we move into an
era in which network operators are taking particularized actions
against individual applications and content, the Commission should
evaluate such practices under sufficient scrutiny to ensure that
whatever actions the operators are taking are actually furthering a
legitimate purpose and are narrowly tailored to serving that legitimate
purpose.
IV. Pending Comcast Complaint
Consumers have alleged that certain operators, and specifically
Comcast, are blocking and/or degrading consumers' access to the
Internet by distinguishing between applications.
The Commission has heard from several engineers and technical
experts who have raised questions regarding the network management
techniques used by Comcast for peer-to-peer traffic.
The Commission is still investigating these complaints and we have
not yet determined whether the actions violated our principles
protecting consumer access to the Internet. However, Comcast appears to
have utilized Internet equipment from Sandvine or something similar
that is widely known to be a relatively inexpensive, blunt means to
reduce peer-to-peer traffic by blocking certain traffic completely. In
contrast, more modern equipment can be finely tuned to slow traffic to
certain speeds based on various levels of congestion.
Specifically, this equipment: (1) blocks certain attempts by
subscribers to upload information using particular legal peer-to-peer
applications by pretending to be the subscriber's computer and
falsifying a ``reset'' packet to end the communication, and (2)
degrades the corresponding attempts to download information using the
same peer-to-peer applications.
Based on the testimony we have received thus far, I think it is
important to clarify a few points.
Contrary to some claims, it does not appear that cable modem
subscribers had the ability to do anything they wanted on the Internet.
Specifically, based on the testimony we have received thus far, some
users were not able to upload anything they wanted and were unable to
fully use certain file sharing software from peer-to-peer networks.
Contrary to some claims, it does not appear this network management
technique is ``content agnostic.'' Indeed, Comcast has publicly stated
that it will migrate to a ``protocol'' (content) agnostic approach to
traffic management in the future, and thus conceded that the techniques
currently in use are not ``content agnostic.''
Contrary to some claims, it does not appear that this technique was
used only to occasionally delay traffic at particular nodes suffering
from network congestion at that time. Indeed, based on the testimony we
have received thus far, this equipment is typically deployed over a
wider geographic or system area and would therefore have impacted
numerous nodes within a system simultaneously. Moreover, the equipment
apparently used does not appear to have the ability to know when an
individual cable segment is congested. It appears that this equipment
blocks the uploads of at least a large portion of subscribers in that
part of the network, regardless of the actual levels of congestion at
that particular time.
Finally, contrary to some claims, it is not clear when they will
actually stop using their current approach. They claim that they will
deploy this new solution by the end of the year but it is unclear
whether they will be finished deploying their solution or just starting
that migration. Indeed the question is not when they will begin using a
new approach but if and when they are committing to stop using the old
one.
V. Next Steps
As the Commission continues its investigation into the complaints
before it, the most important and first step that we can take in
fulfilling our responsibility is to make sure that we are fully
informed. At the very least, we need to obtain greater information to
more fully understand what is happening and what impact operators'
actions are having so that we may better evaluate the reasonableness of
any network management practices at issue.
The Chairman. Thank you very much.
Chairman Martin, you've just testified that you believe the
FCC has sufficient enforcement authority to resolve network
neutrality issues. Now, if you proceed to use this authority, I
suppose you would expect subsequent litigation challenging your
ability to act in this area. If your answer is yes, do you
believe that additional authority from the Congress is
necessary, or is there sufficient authority at the present
time?
Mr. Martin. I think that the Commission has sufficient
authority. I did ask several witnesses at the hearing in
Cambridge, at Harvard, about whether they thought we had the
authority. Some of the carriers testified that they did.
Verizon responded that they thought we did have the authority.
Comcast said they wanted to get back to us, and they've
subsequently filed a letter saying they do not believe we have
the authority.
I believe we do have the sufficient authority to do that,
but I believe you are right, that there may be subsequent
litigation by some of the carriers as a result. At least that's
what they seem to indicate in their most recent response to me.
The Chairman. Senator Stevens?
Senator Stevens. Mr. Chairman, I have a conflict, and I
would hope that I'd be able to submit my questions for the
record for all the witnesses.
Thank you.
The Chairman. Without objection.
Senator Dorgan?
Senator Dorgan. Mr. Chairman, thank you very much.
Before Senator Stevens leaves--he indicated that
nondiscrimination rules represented intensive regulation. The
Internet was created----
Senator Stevens. I said it would lead to intensive
regulation. It would lead to----
Senator Dorgan. Right, the restoration. But, my point was,
we're restoring----
Senator Stevens. It would lead to intensive----
Senator Dorgan.--we are restoring that which previously
existed. My question is the nondiscrimination requirements with
respect to service, that preceded your determination by the
FCC, that ``information services shall not be subject to the
nondiscrimination rule,'' did that nondiscrimination
requirement represent intensive regulation, in your judgment,
as the Internet was created and developed and flowered?
Mr. Martin. I'm not sure that nondiscrimination represented
intensive requirements. I believe that some of the common-
carrier regulations that went beyond that, that were attached
to that telecommunications service category, might----
Senator Dorgan. Right, but I'm talking now about the
nondiscrimination rules----
Mr. Martin. No, I don't think it means that it leads to an
intensive requirement. I would say that I would be cautious
about a pure nondiscrimination requirement, because there are
positive attributes of discrimination; for example, in saying
that voice packets might be preferable because of the need for
that being able to be delivered on a timely basis----
Senator Dorgan. I understand that.
Mr. Martin.--over other kinds of data.
Senator Dorgan. No, I understand that. And I understand the
issue that you've raised about the management of the system and
various things. I think Senator Snowe and I and others, like
Senator Kerry, who have tried to advance this legislation
understand the need to be able to manage the system, but, my
point is we've heard a lot this morning about--that this is re-
regulation and potentially intensive regulation. My point, very
simply, is that to restore that which previously existed in the
earlier formation of the Internet--it was not intensive
regulation, it simply said that, over the entire range of these
services, the nondiscrimination rules would apply.
Now, I'd like to ask you--first of all, as you have
indicated, Comcast has filed a decision they have made that--or
at least their interpretation--that you do not have the
authority on the matter that is before you with respect to
Comcast. Isn't that correct?
Mr. Martin. That's correct.
Senator Dorgan. So, at this point, a very large provider,
who, with a lot of legal resources, says you don't have
authority--well, let me ask you, Do you believe that you need
this authority? You believe you have it. I assume you believe
you have it, and you believe you need it, correct?
Mr. Martin. That's correct. I think----
Senator Dorgan. So----
Mr. Martin. I think it's important that we have that.
Senator Dorgan. So, what if a court says they agree with
Comcast and you don't have it? You will come to us and ask that
we restore that capability?
Mr. Martin. Obviously, I think it is important that we have
the ability to ensure that consumers have unfettered access to
the Internet, and if a court said that we did not have that
authority, I think someone needs to be ensuring----
Senator Dorgan. So, would giving you that authority be
regulating, as some of my colleagues have suggested--re-
regulating----
Mr. Martin. I don't----
Senator Dorgan.--intensive regulation?
Mr. Martin. I don't believe that just merely providing us
the authority, without requirements that we do anything with
it, particularly adopting rules, would be re-regulating. No,
sir.
Senator Dorgan. Now, let me talk about a network service
provider--the Commission should consider whether the network
service provider adequately disclosed its network management
practices. I distinguish on ``management practices,'' as I
understand that, that they may have a whole class of services
that they have to manage in a certain way--voice versus data,
and so on. But, let's say that a network service provider
disclosed to me, as a consumer--and I'm living in a part of the
country where I have probably one or two opportunities to get
my broadband, so very little competition, which is the case in
most parts of this country, I might say--and the network
service provider came to me and said, ``Well, here's the way we
do business. You can get to most of the Internet pretty well,
but I'm a provider that has said to the largest content sites
out there, `You've got to pay me a little bit in order to be
delivered to the homes that I service,' so you should just know
that I've got a little toll that I apply to certain areas.''
Would that adequately disclose, to consumers, practices that
you would think are fine?
Mr. Martin. I think that it's important that there be
adequate disclosure. Adequate disclosure doesn't make the
practice fine; we'd still have to evaluate whether or not it
was a reasonable practice. But, I certainly think that failing
to disclose it is an unreasonable practice. And I think that's
the way I would describe it. So, in your hypothetical, if a
carrier was not disclosing to consumers that they were
preventing you from going to a Website unless that Website paid
them, I think that that would be a problem. However, if they
disclosed it, we would have to analyze the exact facts of what
they were doing to determine whether it was a reasonable
action.
Senator Dorgan. But, Chairman Martin, you believe you need
the authority to take action in these cases. I'm trying to
understand what kind of provocations would incite you to
action. But----
Mr. Martin. Well----
Senator Dorgan.--let me, just for a moment, and then I'm
going to ask you to answer----
I want to describe, Mr. Chairman, why I think this is
important. And I want to do it--I'll use a big content
provider, Google. OK? Google's a behemoth out there, right?
Didn't used to be. And my understanding is, in I believe it was
1998, Larry and Sergei, two guys that were in a dorm room,
moved to a garage that had a garage-door opener, because it was
such an exciting thing. They had eight employees, or whatever
it was, and they moved to a garage with a garage-door opener.
Ten years later, that company is larger than General Motors,
Ford Motors, and Coca Cola, combined, in market valuation. Now,
that's pretty unbelievable.
The question is this. When Whitacre or somebody says, ``You
know, I want to start charging a company that big for the
pipes,'' well, you start charging for pipes and charging
content providers and so on. Are there other kids in a college
dorm room out there that have another new idea that will never
have access to the rest of this country if we've got content
providers that say, ``I'm at the end of the funnel, and I'm, by
God, going to decide who gets through and who doesn't get
through, based on how much money I get, who gets put in a bus
lane, who gets put in a fast lane,'' just describing the
determination of how they want to treat content. My question is
whether this doesn't inevitably defeat the opportunity--
unfettered opportunity for innovation in this country. And
again, I will say, those who have argued so vociferously this
morning against the Internet Freedom Act are saying, ``We don't
like the issue of nondiscrimination.'' By virtue of their
argument, they must be standing up for discrimination. If so,
what kind? What will that mean? How will that change the
Internet?
So, I'm trying to--first of all, I appreciate your being
here, and I appreciate your testimony. I believe what you are
saying is that you believe you need authority to take action in
these areas. And I'm just telling you, one of the biggest
content providers says, ``You don't have that authority.'' So,
shouldn't you ask us to do something to get that authority, in
the event that this is unclear and you spend the next 3 or 4
years in court?
Mr. Martin. Well, as I said, I believe we do need the
authority. I think that we do have the authority to do it. I
think the courts have said that. But, I certainly agree with
you, we need the authority. I think you asked me to give you
some sense of what actions I think would be unreasonable, and I
certainly think if a network operator was saying that every
time you type in ``Google''--you wanted to go to Google, they
were redirecting you to Yahoo!, because Yahoo! was paying them
and Google wasn't, I think that would be a problem. And I think
that would be a problem whether they disclosed it or not.
Merely telling consumers that they were doing that would not
turn it into a reasonable practice. So, that's the kind of
action I think we would need the authority to take action
against.
Senator Dorgan. Mr. Chairman, I've taken longer than I
should, but I have one final point. The issue of discrimination
is a very important provision here. A provider, in my judgment,
could decide to deliver voice packets faster for a certain
reason, based on prioritization, in order to manage their
network, and that would not be discrimination. They can do that
without being discriminatory. But, a provider that decides, as
the fellow from--I was reading, this morning, about the fellow
from England who's setting up a company, Virgin something or
another, saying, ``You know, I'm''--I don't think I have the
quote here, but he's essentially saying, ``Look, I have every
right to be charging the content folks out there.'' I know
that's another country, but it's exactly the same principle of
why we're trying to determine how we might legislate, here, to
restore that which always existed in the creation of the
Internet: nondiscrimination rules.
I find it unbelievable that this is controversial. Who on
earth is standing up for discrimination? I mean, it's just
unbelievable to suggest that this is some sort of intensive
regulation. It is not. It is a restoration of something that
has great common sense. Open architecture of the Internet, open
innovation, and nondiscrimination rules that always existed
prior to the FCC taking action identifying it as an information
service. Let's finally do the right thing.
And, Mr. Chairman, I've taken more than my time. I
appreciate it.
The Chairman. Senator Kerry?
Senator Kerry. Thank you, Mr. Chairman.
Let me pick up, a little bit, if I may, Chairman Martin, on
some of this line of questioning.
First of all, it seems to me obvious, on the face of it,
that, as an administrative agency, if there is a lack of
clarity as to whether or not you have authority, and you are
already on notice by a major player in this sector that they
believe you don't, you're looking at a lawsuit.
Mr. Martin. I think that's right. That carrier has said
that they do not want us to take action, and that we don't have
the authority to do it, and it's in a complaint that's in front
of us today.
Senator Kerry. And isn't it standard procedure within the
legislative process that if there is a lack of clarity as to
something within a federally constituted agency, that it is up
to the Congress to--if it has an intent it wants to have
enforced, to clarify what that intent is?
Or to state the intent, ab initio, that--from the
beginning.
Mr. Martin. Sure. Absolutely. I think part of the reason--
--
Senator Kerry. Well, don't just gloss over that. You say,
``Sure. Absolutely.'' I mean, that's a very fundamental point.
Mr. Martin. No, I think it is, but I also think Congress
has given us that authority. And I guess I'm not as deterred,
potentially, by the lawsuit. Almost every action the Commission
takes, we get taken to court, where someone challenges our
authority.
Senator Kerry. Well, here are the differences----
Mr. Martin. That's the reason why I'm probably not as
hesitant, in that sense.
Senator Kerry. Well, you see, I think what's happened is,
there's a lot, obviously, that's in a gray area here, that, in
effect, the Internet policy statement has four fundamental
principles, which I think are good principles. I'm not arguing
with them. In fact, they are encompassed within the
legislation. But, let me give you, sort of, a side-by-side on
them. Your principles that you keep referring to in the
Internet policy statement are, ``To encourage broadband
deployment, preserve and promote the open interconnected nature
of the public Internet, consumers are entitled to access the
lawful Internet content of their choice.'' So, you have ``a
content of their choice.'' Now, that's--they're entitled to it.
There's not a lot of clarity in that.
In our legislation, we say, ``With respect to any broadband
service offered to the public, each broadband service provider
shall''--required--``not block, interfere with, discriminate
against, impair, or degrade the ability of any person to use a
broadband service to access, use, send, post, receive, or offer
any lawful content, application, or service made available via
the Internet.'' Do you have any disagreement with that?
Mr. Martin. I think that the only hesitation I have is
that, when you say they're not allowed to discriminate, as I
said, there are some good techniques, for example, favoring
voice packets over data packets to make sure that the voice
communications can occur in a realtime basis. I think that one
of the things that I've talked about in the past, that would
concern me is if it were an explicit requirement that had no
flexibility to it.
Senator Kerry. And you view that as discrimination. But, if
you were to take out the word ``discriminate'' or further
describe the word ``discriminate'' adequately, do you have any
objection to that fundamental objective of that word?
Mr. Martin. No, I think it's very similar to our
fundamental objective.
Senator Kerry. All right.
The second one you have is that--``Encourage broadband
deployment, preserve, promote the open interconnected nature of
the public Internet. Consumers are entitled to run applications
and use services of their choice, subject to the needs of law
enforcement.'' We all agree with that.
Here's paragraph 2 of the bill, ``Shall not prevent or
obstruct a user from attaching or using any device to the
network of such broadband service provider only if such device
does not physically damage or substantially degrade the use of
such network by other subscribers.'' Do you have an objection
to that?
Mr. Martin. Again, I think it's very similar to what we
adopted.
Senator Kerry. So do I. But, it's a law.
Mr. Martin. Yes.
Senator Kerry. Third, ``To encourage broadband deployment,
preserve and promote the interconnected nature of public
Internet, consumers are entitled to connect their choice of
legal devices that do not harm the network.'' That's part of
what we just read. That's number three of yours, correct?
Mr. Martin. That's correct.
Senator Kerry. Do you agree with that in the same
paragraph?
Mr. Martin. Of course.
Senator Kerry. Fourth--and these are the only ones you
have--fourth, ``Internet consumers are entitled to competition
among network providers, application and service providers, and
content providers.'' So, you want competition in the field. So
do we.
We say, ``Enable any content, application, or service made
available via the Internet to be offered, provided, or posted
on a basis that is reasonable and nondiscriminatory, including
with respect to quality of service, access, speed, and
bandwidth; be as at least equivalent to the access speed,
quality of service, and bandwidth that such broadband service
provider offers to affiliated content''--in other words, we
want fair competition--``applications, or services made
available via the public Internet; and (c) does not impose a
charge on the basis of the type of content, applications, or
services made available via the Internet into the network of
such broadband service provider.'' In other words, that's real
neutrality; we're not going to have a content that starts
playing games with people's, you know, type of content or the
application, because that does become discriminatory.
Now, do you disagree with any of those?
Mr. Martin. Again, it had some of the nondiscriminatory
language, and I think that I'd have some of the same concerns I
had before.
Senator Kerry. Well, let's presume that we could sharpen
this word ``discriminatory''----
Mr. Martin. Right.
Senator Kerry.--so that we understand exactly what we're
trying to prevent, and we don't become inadvertently--the law
of unintended consequences--we don't create something that, in
fact, is beneficial to the system, where you're actually making
a choice between something that everybody would agree, in terms
of the provision of service, is positive. It's hard to see how
that would happen and have a free market and be letting the
market decide, but assume we tried to do that. Would you have
an objection with the fundamental direction of that?
Mr. Martin. I don't have an objection to the fundamental
direction.
Senator Kerry. So----
Mr. Martin. I have one question about the--part (c), I
think you said, where they weren't----
Senator Kerry. Yes.
Mr. Martin.--allowed to charge anything. I'm not sure I
understood the full implications of that. There are providers
today, not even the network providers, but some people who host
servers on the edges of the network, for example, to try to
increase the speeds for consumers downloading information from
those servers. And I don't think I'd want to limit network
operators', for example, ability to provide that same
commercial service that is being provided by others today.
Senator Kerry. We wouldn't want to do that. I would agree
with that. But, we also don't want to have a situation where a
network provider is creating tiers and actually, you know,
preventing people from getting access under certain----
Mr. Martin. Oh, as I said to Senator Dorgan before, I
agree. I don't think they should be able to say to a Google,
``Unless you pay me, I'm going to redirect your traffic to
Yahoo!'' I think that's right.
Senator Kerry. Well, it seems to me that we ought to be
able to skin this cat; I mean, we ought to be able to find a
way to deal with this one concept, that reasonable people ought
to be able to find a way to protect the public interest here
and to provide you with sufficient clarity as to what the
congressional intent is and what is expected, so that everybody
knows what rules we're playing by.
Right now, if I were in the business, I would be tempted to
want to sue you, because there is a discretionary gray area,
there's a complete lack of clarity as to why you might be
deciding what you're deciding, what you're basing it on. And in
the absence of the clarity of that congressional intent, I
think we're inviting delay.
To speak to, I think, Senator Ensign, when I was out of
here, mentioned that I had mentioned that the company corrected
it. Yes, they did. But, you want to not have a situation where
you have to find an advocacy group that calls it to our
attention and screams about the unfairness, and months go by,
and, after a while, you correct it. It would be better for
everybody, wouldn't it, if you had that established and clear
and everybody knows where the money is going to flow, how the
capital is going to be repaid? There's a kind of certainty in
the marketplace that comes from that, isn't there?
Mr. Martin. Oh, I agree that certainty about our ability to
enforce this is only positive. As I said, I think the
Commission has been clear that we will be enforcing our current
principles, which are fundamentally in the same direction. As
you said, I think there are some issues that reasonable people
would continue to work on, but that even with some differences,
fundamentally they're in the same direction.
I think the Commission has tried to provide the clarity
that we will enforce it, but I don't disagree that making sure
that the Commission has the authority is not, in and of itself
wrong; there's nothing wrong with that. It's something the
Commission has already said that we intend to be doing.
Senator Kerry. Well, I congratulate you on that. I think
the basic principles you've laid out--I think they're
incomplete, and I don't think they allow you to go the distance
here or to provide the marketplace the clarity it needs and
deserves. But, I do think it's moving in the right direction,
and I certainly applaud you for holding those principles.
I'd like to see us, Mr. Chairman, hopefully, provide that
clarity and that certainty to the marketplace.
I think we ought to try to find a way to work with you--and
I'm sure you're willing to work with us--to, maybe, you know,
work on how we define that discriminatory concept a little bit
more.
Mr. Martin. Thank you.
Senator Kerry. Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Pryor?
Senator Pryor. Thank you, Mr. Chairman.
Chairman Martin, let me ask--you mentioned, in your
statement, the Madison River Communications case. And as I
understand it, you have at least a couple of other matters that
have come before you, and, I guess, are pending now. One is
Comcast, where they were delaying some messages; I'm not quite
sure of all the details on that. And Verizon apparently--
currently has matters pending before your Commission. How is
that working? Right now, we're--you're doing this on a case-by-
case basis. How is that working?
Mr. Martin. Well, as I said, we've adopted the principles
that I was just going through with Senator Kerry, and I believe
that we're enforcing those through an adjudication process. I
think that is how we would probably enforce, any kind of
similar principles. And I think that it, thus far, is working
fine. The Commission has acted in the past, as I testified to,
in the context of stopping a telecommunications carrier from
limiting the consumer's access to a Voice-over-IP service. I
think that we have, as you said, two complaints with us now,
that I think the Commission will take action on, as well.
Senator Pryor. Because there's no statute on this issue,
are you seeing companies trying to test the water and figure
out what the boundaries are?
Mr. Martin. You know, we weren't. And, indeed, when the
Supreme Court upheld our information service classification,
they explicitly stated that they believe we had authority under
Title I of the statute, so we had statutory authority to adopt
any rules we would deem necessary to adequately protect
consumers' broadband access rights. So, I believe we do have
that statutory authority.
Up until the hearing at Harvard, and Comcast's subsequent
letter, I don't believe there had been anyone who had asserted
that we did not have that authority.
Senator Pryor. OK. And you mentioned, you know, Madison
River and Comcast and Verizon. Are you confident that those are
the only three companies out there that are trying to restrict
content in some way?
Mr. Martin. Those are the only ones that have been brought
to our attention. I believe Vuze released a press release
yesterday saying that they thought that the equipment that was
being used to block applications to peer-to-peer by Comcast was
also more prevalent in the network. There was an analysis done
of domestic networks and of networks abroad. So, that
particular practice may be more prevalent. We don't have any
specific facts or allegations against another company.
Senator Pryor. Now, when BellSouth and AT&T merged--I
guess, last year; I don't remember exactly when that was, the
Commission required them to do a--what--a 2-year, I guess you
say, moratorium, or a 2-year requirement on certain business
practices. Is that company--is AT&T behaving differently than
the rest of the market right now?
Mr. Martin. Well, there are no allegations against them
right now, so we're not aware of anything that they are doing,
and there aren't any allegations that they were, for example,
interfering with peer-to-peer content or blocking the uploading
ability of individuals using peer-to-peer, or degrading the
ability for someone to download using peer-to-peer.
Senator Pryor. Let me ask about investment out there.
Because I have a lot of rural areas in my State, as do many of
the Senators here today, you know, I know that investment--the
money tends to go where the people are, where the business is.
And, you know, one of the concerns I have is that the
investment in rural broadband will not flow in such a way that
rural broadband will really have equal access to more urban
areas in this country. Do you share that concern?
Mr. Martin. Oh, sure. I think it's a significant challenge
to make sure that we have policies in place that are trying to
ensure that, ultimately, people who live in rural areas don't
get left behind those that live in urban areas. And I think
that that actually was embodied in Congress's enactment of the
universal service provisions of the Telecom Act, where they
said that people there should be entitled to advanced services,
ultimately similar to what's provided in urban areas.
Senator Pryor. Are there policies that you need to change,
or that the Congress needs to change, relating to broadband
that would allow more investment to flow out to rural America?
Mr. Martin. We've tried to change some policies. We
actually recently adopted provisions for gathering more
information to establish the current floor of what people have,
very similar to Chairman Inouye's bill, to try to gather more
information. We actually also adopted rules recently to change
the definition of basic broadband to increase the speed for it.
That was something that I voted for, along with the two
Democratic commissioners, to increase the speed of what
constitutes basic broadband. I think that those are important
to evaluate where we actually are. Another policy change that I
think that we need, and have supported in the past, is
legislation that would, for example, remove some of the
franchising limitations that may have stifled the carrier's
ability to invest in networks to be able to provide a
competitive video alternative. Bidding on video services is an
important component of that infrastructure investment, and I
think that's an important policy change that I've supported in
the past, that I think that Congress could end up doing.
Senator Pryor. That's all I have, Mr. Chairman. Thank you.
The Chairman. Thank you very much.
Senator Smith?
Senator Smith. Thank you, Mr. Chairman.
And, Chairman Martin, thank you for being here. I--as I
listen to our--my colleagues and our questions to you, it seems
like it's--it could easily be framed as those who are for
discrimination, those who are against discrimination. I don't
really see it that way. What I see it as is that we're all pro-
deployment of more broadband to urban and rural areas. And as I
contemplate how to best encourage deployment, not just to urban
areas, but to rural areas, as well, I can't think of anything
that would be more discouraging to investment in rural
broadband deployment than if we take a regulatory approach
right up front. My own judgment is that if you can pursue the
adjudicatory approach swiftly as these cases arise, then we
will do--we will provide the market certainty that Senator
Kerry is talking about. That's the objective, as I see it; not
whether you're for or against discrimination. We want the
Internet to be open.
Now, I understand that you're holding several investigative
hearings about some complaints that occasionally do arise. I'm
not going to ask you particulars on that, but you apparently
questioned a network operator as to whether the FCC has the
authority to pursue these investigations, to which, I believe,
the response was, no, you do not. They later clarified their
response, that the Powell Principles, what I believe are the
floor of consumer rights on the Internet, were simply a
statement of policy and not regulations; hence--and hence, not
subject to enforcement through, say, injunctions or
foreclosures. Now, I've read your statement, and I know that
you disagree with the position articulated at that field
hearing. My question to you is, Does the FCC have the authority
to enforce the Powell Principles? Or, put another way, must the
Powell Principles be codified?
Mr. Martin. Well, I think that we do have the authority,
and, indeed, the Commission has expressly stated that. Almost a
year ago, in April of 2007, the majority of the Commission very
expressly stated that we have the authority to both adopt and
enforce the network neutrality principles it announced in the
Internet policy statement.
Senator Smith. Have Federal courts affirmed that?
Mr. Martin. It hasn't come before the courts----
Senator Smith. Is there litigation heading that way?
Mr. Martin. Well, I think that the concern that has been
raised is, as a result of Comcast now claiming that we don't
have that authority, will that lead to litigation. As I said,
lots of the actions the Commission takes end up in the courts,
run through litigation, and we follow whatever the courts end
up clarifying.
But, I believe that the Supreme Court, in its Brand X
decision, very clearly articulated that we had ancillary
authority, under Title I of the 1996 Telecommunications Act, to
take these actions.
Senator Smith. On a separate but related matter, you
currently have an open proceeding that considers industry
network management practices. It seems that much of the network
congestion is derived from massive amounts of illegal print
pirated material. I surmise from your statement that narrowly
tailored network management practices designed to protect
intellectual property is an acceptable practice by network
operators. Can you be more specific as to what types of network
management should be allowed to combat trafficking in illegal
materials?
Mr. Martin. Well, there have been several carriers who have
talked about, and been in discussions with, content providers
about putting on filters that would distinguish between
material that had the appropriate copyright and those that
didn't stop pirated content. I think that's fundamentally
different from a network management practice that focused on a
particular application, that actually said, ``We're going to
stop this kind of practice, peer-to-peer practice, or more--
even more particularly, any kind of peer-to-peer using this
certain technology.'' I think those kinds of practices would be
both over- and under-inclusive; it would stop some use of that
technology to distribute legal content, and it wouldn't catch
other technology that was still distributing illegal content.
So, if your goal is to stop pirated content, you would need
to put some kind of filter on that would try to identify that.
Our Internet principles are only designed to protect the access
to legal content, and that would be a perfectly reasonable kind
of network management practice.
Senator Smith. Thank you, Mr. Chairman.
The Chairman. Senator Wicker?
STATEMENT OF ROGER F. WICKER,
U.S. SENATOR FROM MISSISSIPPI
Senator Wicker. Mr. Chairman, I will simply submit
questions for the record and allow you to move on to the next
panel.
Thank you.
The Chairman. Without objection.
Senator Dorgan?
Senator Dorgan. Mr. Chairman, I just wanted--as we allow
Chairman Martin to leave, I wanted to hold up the two pieces,
because several of us have spoken of this.
This is--it describes the docket, ``The Internet policy
statement did not create enforceable rules.'' This, from
Comcast Corporation to the FCC, number one.
Number two, again, comments about the FCC's authority, by
Comcast, at their filing, ``The Commission's statutory
authority to regulate broadband Internet services is limited.
The exercise of Title I authority over network management
practices would also constitute an abrupt departure from the
Commission's numerous consistent and successful precedents.
Absent a reasoned explanation for its conduct, such a sharp
departure from established Commission policy would be arbitrary
and capricious, in violation of the APA.''
The reason I wanted to put that up is, you know, the
allegation is made--and I understand this may or may not be
right, but at least it creates the question of uncertainty,
here, about whether your principles are enforceable by you. I
don't know whether they are or not, but I think most of us
would believe that, whether the codification of these
principles or the passage of the Internet Freedom Act,
something is necessary to make certain that we resolve this.
This--I mean, you say you have the authority, but you may well
not have the authority. You may not find that for years. You
may be litigating for a long period of time.
Chairman Martin, I appreciate your coming.
And, Mr. Chairman, thank you for allowing me to describe
what we had previously discussed.
Senator Smith. Mr. Chairman, if I may respond, I'd be happy
to introduce a bill with Senator Dorgan to codify the Powell
Principles.
Senator Dorgan. Well, it's short of what we need to do, but
I--you know, I think we can talk about that in the context of
an Internet freedom bill and other things.
The Chairman. Thank you very much, Chairman Martin----
Mr. Martin. Thank you.
The Chairman.--appreciate your participation.
Our next panel, made up of the Vice President of
Communications, Christian Coalition of America, Ms. Michele
Combs; the Executive Director of the American Enterprise
Institute, Center for Regulatory and Market Studies, Dr. Robert
Hahn; the President of the Writers Guild of America, West, Mr.
Patric Verrone; Actress, Writer, and Producer, Ms. Justine
Bateman; the President and CEO, National Cable and
Telecommunications Association, Mr. Kyle McSlarrow; and
Professor Lawrence Lessig, of Stanford Law School.
[Pause.]
The Chairman. And the Chair recognizes Ms. Michele Combs.
Ms. Combs, welcome to the Committee.
STATEMENT OF MICHELE COMBS, VICE PRESIDENT OF COMMUNICATIONS,
CHRISTIAN COALITION OF AMERICA
Ms. Combs. Good morning, Mr. Chairman and distinguished
members of the Committee on Commerce, Science, and
Transportation. My name is Michele Combs, and I am the Vice
President of Communications for the Christian Coalition of
America. Thank you for inviting me to testify today.
Use of the Internet has allowed the Christian Coalition to
amplify the voices of millions of hardworking pro-family
Americans in a way that has revolutionized their ability to be
heard and engaged in political process. Consequently, the
reason the Christian Coalition supports net neutrality is
simple. We believe that organizations such as the Christian
Coalition should be able to continue to use the Internet to
communicate with our members and a worldwide audience without a
phone or cable company snooping in our communications and
deciding whether to allow particular communication to proceed,
slow it down, block it, or offer to speed it up only if the
author pays extra 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 instant,
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 bad
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
companies' argument is disingenuous, and, frankly, it offends
me, and I respectfully suggest that it ought to offend you.
Right now, the cable companies are not subject to network
neutrality regulation, yet family groups continue to criticize
the amount of pornography that cable companies make available
on their systems, and even profit from. Yet, the cable industry
would have us believe that if you impose network neutrality
rules, suddenly they're going to try and block illegal content,
but would be hindered. Let's remember, it was the King James
Bible that Comcast blocked, which caused the current
controversy.
At the FCC hearing in Palo Alto last week, one witness
noted 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 network
neutrality? Arguably, any unsavory producer of content should
be worried that its content could be disadvantaged in a non-
neutral network. I suggest that the answer is, the pornography
industry knows that 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? Nonprofit 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's be clear, right now
the telephone and cable companies are investing in 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 the same technologies to block the Christian Coalition's
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 speechwriters of the
Christian Coalition and others.
Increasingly, faith-based groups are turning to the
Internet to promote their political rights 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.
We should all try to make the Internet a safe environment for
our future, our children, and our grandchildren.
[The prepared statement of Ms. Combs follows:]
Preprared Statement of Michele Combs, Vice President of Communications,
Christian Coalition of America
Good morning, Mr. Chairman and distinguished members of the
Committee on Commerce, Science, and Transportation, my name is Michele
Combs, and I am the Vice President of Communications for the Christian
Coalition of America. Thank you for inviting my organization to testify
at this hearing on the ``Future of the Internet.''
The Christian Coalition of America is the largest and most active
conservative grassroots political organization in the United States. We
offer people of faith a vehicle to be actively involved in shaping
their government. Christian Coalition of America is a political
organization, which is made up of pro-family Americans who care deeply
about becoming active citizens for the purpose of guaranteeing that
government acts in ways that strengthen, rather than threaten,
families.
Our hallmark work lies in voter education. Prior to the last
election, the Christian Coalition of America distributed a record 70
million voter guides throughout all 50 states. These non-partisan
guides gave voters a clear understanding of where various candidates
stood on the issues important to them. With this knowledge, millions of
voters went to the polls to make their voices heard.
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.
The Internet connects people all over the world in a manner, scope,
and ease of use that would be impossible anywhere but online. It
provides a voice for even the most modest members of society to
disseminate ideas on a scale traditionally reserved only for the most
powerful.
Consequently, the reason the Christian Coalition supports Net
Neutrality is simple. We believe that organizations such as the
Christian Coalition should be able to continue to use the Internet to
communicate with our members and with a worldwide audience without a
phone or cable company snooping in on our communications and deciding
whether to allow a particular communication to proceed, slow it down,
block it, or offer to speed it up if the author pays extra 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 instance, the network operators
have claimed that these actions were for ``network management''
purposes.
Verizon Wireless Blocking Political Speech. Last fall, Verizon
Wireless censored text messages sent by the pro-choice advocacy group,
NARAL, to its own members who had voluntarily signed up to receive
them. When NARAL protested, the phone company claimed the right to
block any content ``that, in its discretion, may be seen as
controversial or unsavory.'' When this did not satisfy the concerned,
Verizon Wireless said not to worry, because the company would also
block the speech of pro-life advocates such as the Christian Coalition.
After news of Verizon's censorship hit the front-page of the New
York Times--sparking a loud public outcry--the company quickly
backpedaled, issuing an apology and blaming the blocking on a ``dusty
internal policy,''--while still reserving the right to block text
messages in the future at its own discretion.
AT&T Blocking Political Speech. In August 2007, AT&T censored a
webcast of a concert by the rock band Pearl Jam just as lead singer
Eddie Vedder started talking about politics. The company claimed it was
a glitch--as were at least three other instances when AT&T cutoff
political speech during live concerts.
Comcast Blocking Access to the King James Bible. In October 2007,
the news organization Associated Press reported that Comcast was
blocking consumers' ability to download the King James Bible using a
popular file-sharing technology. Comcast at first denied that it was
engaging in such discrimination. After independent tests confirmed that
Comcast was indeed engaging in this behavior, Comcast claimed that it
was simply conducting routine network management. This ``routine
network management'' has launched two petitions at the Federal
Communications Commission, a consumer complaint at the FCC, at least
two class action lawsuits, an investigation by a state attorney
general, and countless complaints in the blogosphere. Yet Comcast
continues to argue it has the right to discriminate against such
applications. It is my understanding that it now argues that the FCC
has no legal authority to do anything about it. And, I understand that
some cable companies have argued to the FCC that not even Congress has
the Constitutional authority to protect consumers from such bad
behavior.
It has also been pointed out that Comcast's discriminatory conduct
just so happens to block access to video distribution applications from
companies like Vuze that compete with Comcast's own programming.
If Comcast were to create a Christian family channel, would
Washington allow it to block access to competing programming
distributed through the Christian Coalition website?
While the cable companies complain to the FCC about their rights to
``manage their network'' without interference, I ask you to consider
the speech and commerce rights of organizations like the Christian
Coalition, NARAL, consumer groups, technology companies, and millions
of users of the Internet.
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,
including legislation offered by Senators Dorgan and Snowe, would allow
the network operators to block illegal content. No one I know opposes
that.
It seems that the cable companies' argument that they are merely
engaging in ``legitimate network management'' is disingenuous, and
frankly it offends me. And I respectfully suggest that it ought to
offend the Committee.
Right now, the cable companies are not subject to a network
neutrality regulation, yet family groups continue to criticize the
amount of pornography that cable companies make available on their
systems and even profit from. Yet, the cable industry would have us
believe that if you impose network neutrality rules, it will suddenly
clean up the Internet?
Let's remember, it was the transmitting of the King James Bible
that Comcast blocked, which caused the current controversy. It was not
as if the company was trying to protect consumers from inappropriate
content.
Why do you think that the pornography industry has not supported
net neutrality? Arguably, any unsavory producer of content should be
worried that its content could be disadvantaged in a non-neutral
network. I suggest that the answer is that the pornography industry
knows that 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 of special deals? 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 governments should censor speech. But let's
be clear. Right now, the telephone and cable companies are investing in
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's speech from being
received by its citizens. The Christian Coalition is merely asking
Congress to create simple rules of the road that make it clear that it
will allow cable and phone companies 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, 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.
The Chairman. Thank you very much, ma'am.
Dr. Hahn?
STATEMENT OF ROBERT W. HAHN, Ph.D., EXECUTIVE
DIRECTOR, CENTER FOR REGULATORY AND MARKET
STUDIES, AMERICAN ENTERPRISE INSTITUTE
Dr. Hahn. Thank you, Chairman Inouye and Ranking Member
Stevens and distinguished Members of this Committee. I am
pleased to appear before you today to present my views on a
small subject: The Future of the Internet.
I'm an economist who has studied regulation for more than
25 years. I now direct the AEI-Reg Markets Center. I've also
served on the faculties at Harvard and Carnegie Mellon.
Most of you saw ``The Graduate,'' in which Dustin Hoffman
was told, in one word, the key to the future: plastics. Well,
at the risk of making a similar mistake, I want to leave you
with two words today: pricing freedom.
Let me begin with a fictional story about the importance of
``pricing freedom.'' Imagine there was a firm named Oogle, and
it wanted to bring together sellers and consumers on the Net
through text advertising. The only problem was that Oogle had
to figure out a way to make money to invest the billions needed
to bring all these folks together and to become a leader in
Internet search.
Oogle's insight was to charge advertisers a penny each time
a consumer clicked on an Internet ad, and charge consumers
zero. This was brilliant, and Oogle revolutionized the
Internet, as we know it, and made lots of money.
But, now imagine, in the interest of so-called ``advertiser
neutrality,'' the advertisers effectively lobbied Congress to
stop Oogle from charging them and only charged consumers
instead. Would we have the Internet, as we know it? I seriously
doubt it.
Oogle was successful, in part, because it was given the
pricing freedom to figure out what economic model would work
best for consumers, sellers, and itself. The same logic holds
true in the world of net neutrality.
Net neutrality is a policy proposal that would regulate how
network providers manage and price the use of their networks.
While the concept sounds great, I believe that it is downright
dangerous.
Proposed legislation would mandate that Internet service
providers exercise no control over the content that flows over
their lines, and would bar those providers from charging
content providers for certain enhancements, such as priority
delivery, like FedEx offers. Applications ranging from
telemedicine to online games could be jeopardized by such
regulation.
The AEI-Brookings Joint Center issued a position paper on
net neutrality, signed by 17 distinguished economists, and I'd
like to discuss two of our recommendations.
First, firms should be allowed to experiment with different
pricing schemes for providing Internet access, just like the
hypothetical company Oogle did. One key advantage of giving
Internet service providers pricing flexibility is that it gives
them an incentive to lower broadband access prices for
consumers, a point several legislators seem to have missed. A
second advantage is that it gives them an incentive to develop
enhanced service offerings that will enable realtime
applications to flourish.
Our second recommendation was that Congress and Federal
regulators should promote policies that foster Internet
innovation. One such policy is spectrum liberalization.
Highspeed Internet that uses wireless networks may be the next
big thing. The FCC should make additional licensed spectrum
available for flexible use as soon as possible so these
networks can be improved.
Both Congress and the FCC should refrain from imposing
special conditions on spectrum licenses, such as the recent
openness requirement that was introduced in the last FCC
auction. This requirement would allow third parties with
wireless applications to piggyback on a licensee's network at
no charge. While openness, like net neutrality, may sound good,
the cost of mandatory openness for end users is likely to be
significant and has never been compared against the benefits.
My bottom line is that the issues raised in the net
neutrality debate can be effectively addressed by allowing
Internet pricing freedom, fostering more efficient use of
spectrum, and using antitrust authority where appropriate.
Allowing pricing freedom is likely to be the best way to
ensure efficient innovation on the information superhighway.
Thank you very much.
[The prepared statement of Dr. Hahn follows:]
Prepared Statement of Robert W. Hahn,* Executive Director,
Center for Regulatory and Market Studies, American Enterprise Institute
---------------------------------------------------------------------------
\*\ Robert Hahn is Executive Director of the Reg-Markets Center and
a senior fellow at AEI, and a non-resident senior fellow at Brookings.
He would like to thank Caroline Cecot and Molly Wells for research
assistance. This testimony builds on research that I have done with a
number of colleagues, including Robert Crandall, Robert Litan, Hal
Singer, and Scott Wallsten. The views expressed in this paper reflect
solely those of the author and do not necessarily reflect those of the
institutions with which he is affiliated.
---------------------------------------------------------------------------
1. Introduction
I am pleased to appear before this Senate Committee to present my
views on the future of the Internet. I have studied and written about
regulation for more than two decades. I also have done a great deal of
work on telecommunications and Internet regulation.\1\
---------------------------------------------------------------------------
\1\ See William J. Baumol et al., Economists' Statement on Net
Neutrality (AEI-Brookings Joint Center for Regulatory Studies, Related
Publication No. 07-08, 2007) [hereinafter Baumol et al.]; Elizabeth E.
Bailey et al., Economists' Statement on U.S. Broadband Policy (AEI-
Brookings Joint Center for Regulatory Studies, Related Publication No.
06-06, 2006) [hereinafter Bailey et al.]; Robert Hahn & Scott Wallsten,
The Economics of Network Neutrality, 3 The Economists' Voice, n. 6,
article 8 (2006); Robert Hahn & Robert Litan, The Myth of Network
Neutrality And The Threat to Internet Innovation, Milken Inst. Rev. 28,
First Quarter (2007); Robert Hahn et al., The Economics of Wireless Net
Neutrality, 3 J. Competition L. & Econ. 399, n. 3 (2007); Robert Hahn &
Anne Layne-Farrar, Is More Government Regulation Needed to Promote E-
commerce?, 35 Conn. L. Rev., n. 1 (2002); Robert Hahn & Anne Layne-
Farrar, The Law and Economics of Software Security, 30 Harv. J. L. &
Pub. Pol'y 284, n. 1 (Fall 2006); Robert Hahn et al., Bandwidth for the
People, 127 Pol'y Rev. 67, (October/November 2004).
---------------------------------------------------------------------------
About a decade ago, I helped organize a cooperative effort between
the American Enterprise Institute and the Brookings Institution to
study regulation. The result was the AEI-Brookings Joint Center for
Regulatory Studies, which I directed. I now direct the AEI Center for
Regulatory and Market Studies, which is the successor to the Joint
Center.\2\
---------------------------------------------------------------------------
\2\ All Reg-Markets Center and Joint Center publications can be
found at http://www.reg-markets.org.
---------------------------------------------------------------------------
A primary objective of the center is to hold lawmakers and
regulators more accountable by providing thoughtful, objective analysis
of existing regulatory programs and new regulatory proposals. The Reg-
Markets Center and the Joint Center have been at the forefront of
outlining principles for improving regulation and enhancing economic
welfare.\3\
---------------------------------------------------------------------------
\3\ See Arrow et al., Is There a Role for Benefit-Cost Analysis in
Environmental, Health, and Safety Regulation?, 272 Science 1569, n.
5268 (1996).
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In its short history, the Internet has grown at an astounding pace.
This growth is seen in the bandwidth consumed by the video sharing site
YouTube. By some estimates, YouTube consumed as much bandwidth in 2007
as the entire Internet combined in 2000! \4\
---------------------------------------------------------------------------
\4\ Steve Lohr, Video Road Hogs Stir Fear of Internet Traffic Jam,
N.Y. Times, Mar. 13, 2008, at 1.
---------------------------------------------------------------------------
That growth is expected to continue. Traffic on the Internet is
expected to nearly double every 2 years.\5\ Much of this growth will be
driven by peer-to-peer network traffic, which is expected to quadruple
by 2011.\6\ Internet traffic will also continue to grow as high-
definition video and other traditional commercial video services are
delivered via IP within a single network.\7\ Consumer video services
are expected to grow from 18 percent of consumer Internet traffic to 43
percent.\8\
---------------------------------------------------------------------------
\5\ Cisco Systems White Paper, Global IP Traffic Forecast and
Methodology, 2006-2011, Jan. 14, 2008, at 1, available at http://
www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/net
implementation_white_paper0900aecd806a81aa.pdf (``After a brief mid-
decade slowdown, IP traffic will nearly double every 2 years through
2011. Total IP traffic will nearly quadruple in the four-year period
from 2007 to 2011.'' at 1. ``Consumer IP traffic generated by the
transport of cable and IPTV video-ondemand (VoD) content will grow
faster than consumer Internet traffic.'').
\6\ Id. at 2 (``Peer-to-peer traffic still dominates Internet
traffic and growth is not slowing. traffic is not expected to decrease
over the forecast period. Instead, it will nearly quadruple from 1,330
petabytes per month in 2006 to 5,270 petabytes per month in 2011,
driven by the global increase in high-speed broadband penetration, the
increasing use of peer-to-peer for standard-definition video file
exchange, and the advent of high-definition video file exchange and
television content via peer-to-peer.'').
\7\ Id. at 1 (``Consumer IP traffic generated by the transport of
cable and IPTV video-on-demand (VoD) content will grow faster than
consumer Internet traffic. Consumer IPTV and IP VoD traffic will grow
at a CAGR of 81 percent, while consumer Internet will grow at a rate of
42 percent.'').
\8\ Id. (``In 2011, only 57 percent of consumer IP traffic will be
Internet traffic, while 43 percent will be traffic generated by the
delivery of traditional commercial video services over IP within a
single operator's network. This is a dramatic shift from the
composition of 2006 consumer IP traffic, over 82 percent of which is
Internet traffic.'').
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Since I only have 5 minutes, let me cut to the chase. As America's
lawmakers, you have the ability to dramatically affect the future of
Internet growth and innovation.
That's both good news and bad news. The good news is that if you
choose policies wisely, and regulate with a very light hand, we will
continue to enjoy the immense benefits that this medium has offered all
of us. If, on the other, you choose policies that dramatically
interfere with the workings of the marketplace, you could significantly
reduce the pace of Internet innovation, leading to losses for consumers
that could be in the billions of dollars. Applications ranging from
telemedicine to online games could be jeopardized by regulation that
seeks to bar contracting for prioritized delivery--a critical
ingredient for these applications to run effectively. Without the
ability to set prices freely, these applications, along with their
associated benefits for the economy, may never be introduced. But,
fortunately, you have the opportunity to make wise choices.
So how to choose policies wisely, some of you may ask? That is a
good question, and one that I would like to focus on today. I am an
economist, so my basic answer is that you need to look carefully at the
benefits and costs of various policy interventions, and choose those
for which you believe the benefits are likely to exceed the costs.
In the interest of time, I would like to focus my remarks on the
issue of net neutrality. I will conclude with a couple of observations
about the current controversy over network management, which is related
to the net neutrality issue.
2. Network Neutrality \9\
---------------------------------------------------------------------------
\9\ This section draws heavily on the AEI-Brookings net neutrality
statement. See Baumol et al., supra note 1.
---------------------------------------------------------------------------
Network neutrality is a policy proposal that would, among other
things, regulate how network providers manage and price the use of
their networks.
Net neutrality proponents assert that if Internet service providers
are allowed to charge content providers for enhanced service offerings,
those content providers that cannot afford the ``toll'' will be forced
to exit--thus impairing innovation at the ``edges'' of the Internet. In
contrast, net neutrality opponents suggest that allowing
experimentation with new business models is the key to: (1) Internet
innovation at both the ``core'' and the ``edge'' of the network, and
(2) the deployment of more intelligent networks needed to handle
rapidly growing Internet traffic.
Congress has introduced several bills on network neutrality over
the last few years.\10\ Proposed legislation generally would mandate
that Internet service providers exercise no control over the content
that flows over their lines, and would bar service providers from
charging content providers for certain enhancements such as prioritized
delivery. For example, senators Byron Dorgan and Olympia Snowe
introduced network neutrality legislation in 2006 and again in 2007,
which, had it passed, would have prevented any contracting between
access providers and content providers.\11\ Several scholars have
uncovered the unintended consequences of such a prohibition, including
higher prices of Internet service for end users and decreased
innovation in application markets.\12\
---------------------------------------------------------------------------
\10\ H.R. 5273, 109th Cong. 2(10) (2006). S. Res. 2360, 109th
Cong. 4(a)(6) (2006).
\11\ Dorgan, Snowe Take Another Stab at Net Neutrality Legislation,
TR Daily, Jan. 9, 2007.
\12\ See, e.g., Robert Litan & Hal J. Singer, The Unintended
Consequences of Net Neutrality, 5 Journal on Telecommunications and
High Tech Law 533 (2007).
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These proposals must be considered carefully in light of the
underlying economics. My basic concern is that most proposals aimed at
implementing net neutrality are likely to do more harm than good.
Analysis
Regulation of prices and services has often resulted in costs that
exceed benefits, especially in competitive markets. Highly dynamic
markets, such as those for high-speed Internet services, pose
particular problems because they change so quickly. In such dynamic
markets, it is difficult for regulators to determine appropriate prices
because technology and consumer demands are difficult to forecast; and
introducing price regulation risks discouraging the healthy process of
risk-taking innovation--which is especially important in
telecommunications.
The market for high-speed Internet services, or broadband, is the
key concern. Before jumping to conclusions about market power, one
should look carefully at the data. And the data suggest that there is
robust and growing competition in the market for highspeed Internet
services in both the wireline and wireless space. Prices for digital
subscriber line service dropped by roughly one-third between 2001 and
2006. In the case of cable modem service, the quality-adjusted price
declined significantly, as cable connection speeds increased
significantly while prices held steady. In March of this year, the FCC
reported that high-speed lines increased by 22 percent during the first
half of 2007, from 82.8 million to 100.9 million lines in service,
following a 27 percent increase, from 65.3 million to 82.8 million
lines, during the second half of 2006.\13\ Virtually the entire U.S.
population lives in a zip code where a high-speed service provider
operates, and numerous service providers compete in the major
population centers. And this is to say nothing of the boom in handheld
devices, like blackberries, that provide wireless access to the net.
---------------------------------------------------------------------------
\13\ FCC, High-Speed Services for Internet Access as of June 30,
2007, released March 2008.
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In most, but not all, cases, I believe these markets are workably
competitive. Moreover, even if some service providers could exercise
some market power, the multi-sided nature of the market and the
geographic scope of most Internet content means that they still have
powerful incentives not to block content. In particular, providers need
content in order to attract subscribers. If a provider restricted
access, its product would be less valuable and attract fewer
subscribers. The point is that even firms with market power in one part
of the market will not necessarily be able to control content.
Recommendations
I offer two recommendations related to pricing flexibility and
facilitating more competition.
Recommendation 1: Firms should be allowed to experiment with
different pricing schemes for providing Internet access.
One advantage of giving Internet service providers pricing
flexibility is that it will give them incentives to make new
investments in network intelligence, which will support a range of
real-time applications from telemedicine to online games. Without such
innovations, these real-time applications may never see the light of
day.
Another advantage of pricing freedom is that it can lead to lower
subscription prices for end users. Most economic models of ``two-sided
platforms'' show that platform owners have strong incentives to
subsidize the most price-sensitive customers, which in this case would
be end users.
There is not one right way to charge different customers in these
high-speed markets. That is precisely why broadband providers should be
allowed to charge market prices on both sides of the market, unless
there is a clear showing that the optimal pricing policy from the
perspective of platform owners is not consistent with the socially
optimal pricing policy. Not only do we lack empirical proof of this
proposition, there does not appear to be any theoretical basis.
Recommendation 2: Congress and Federal regulators should promote
policies that increase the opportunities for competition and foster
Internet innovation. One such policy would be spectrum liberalization.
High-speed Internet connections may be provided using wireless
networks. Much valuable spectrum, however, is not available for its
most productive uses. The Federal Communications Commission should make
additional licensed spectrum available for flexible use as soon as
possible and allow it to be traded so that spectrum can be allocated to
its highest-valued applications.\14\
---------------------------------------------------------------------------
\14\ See Bailey et al., supra note 1.
---------------------------------------------------------------------------
Both Congress and the FCC should refrain from imposing special
conditions on spectrum licenses, such as the recent openness
requirement that was introduced in the last FCC spectrum auction for
certain licenses. This requirement would allow third-parties with
wireless applications to piggyback on the licensee's network at no
charge. While openness may sound good, the cost of mandatory openness
is significant, and to this day, has never been compared against the
benefits.
One measure of the size of the costs imposed by an open-platform
requirement is provided by the recent FCC spectrum auction itself.
Bidders offered less for the C-block than for other, roughly comparable
spectrum. Indeed, one other block went for almost triple the price per
potential customer.\15\ Multiplying these price differences by the
population in the United States (286 million) and the size of the C
block (22 megahertz), we can infer that bidders estimated that the
openness requirement would reduce the value of the C block by between
$2.5 billion and $12 billion. That lower value translates into lower
auction revenue, which from a pure budgetary perspective, is not good
news for taxpayers.
---------------------------------------------------------------------------
\15\ Spectrum in the A block sold for about $0.40 per ``megahertz-
pop'' (a measure of spectrum quantity adjusted for the potential
population it can serve) than spectrum in the C block. Similarly, B-
block spectrum sold for an average of $1.91 more.
---------------------------------------------------------------------------
3. Network Management
The issue of managing high-speed Internet networks has been in the
news lately. Congressman Ed Markey introduced the ``Internet Freedom
Preservation Act of 2008.'' \16\ At about the same time, the Federal
Communications Commission held hearings at Harvard to consider whether
network management practices of Internet providers should be regulated
in some way. The Commission released a policy statement promoting open
access to the Internet. The policymakes an exception for ``reasonable''
network management, but does not define what is meant by reasonable.
---------------------------------------------------------------------------
\16\ See Robert Hahn, The Internet Freedom Act (Reg-Markets Center,
Policy Matters No. 08-03, 2008) for an analysis of this proposal.
---------------------------------------------------------------------------
A key catalyst for the interest in this seemingly arcane subject is
the recent controversy stemming from Comcast's decision to limit its
customers' use of BitTorrent, a file-sharing application. Most scholars
agree that a firm like Comcast should not be allowed to simply
disconnect a user from the network, or slow the delivery of content,
unless the firm and user agreed to those contract terms upfront.
But a funny thing happened recently in this controversy that should
give lawmakers and regulators reason for optimism in the marketplace.
That funny thing was that Comcast and BitTorrent came to an agreement.
Comcast also reached an agreement with Pando Networks, the leading
managed peer-to-peer content delivery service, which will lead to the
creation of a peer-to-peer ``Bill of Rights and Responsibilities'' for
peer-to-peer users and Internet service providers. Such agreements
provide a path for resolving thorny network management issues in a
voluntary and collaborative market-driven process.
Conclusion
The issues raised in the net neutrality and network management
debates can be effectively addressed by using antitrust authority where
appropriate, allowing Internet pricing flexibility, and fostering more
efficient use of spectrum to facilitate entry into the broadband
market.
My basic message is that government should allow firms to
experiment with different business models for Internet services.
Allowing such market flexibility is likely to be the best way to ensure
efficient innovation on the information superhighway.
The Chairman. I thank you very much, Dr. Hahn.
And now may I call upon Mr. Verrone.
STATEMENT OF PATRIC M. VERRONE, PRESIDENT,
WRITERS GUILD OF AMERICA, WEST
Mr. Verrone. Thank you, Chairman Inouye, Vice Chairman
Stevens, members of the Committee, all of you. My name is
Patric Verrone. I am the President of the Writers Guild of
America, West. We represent nearly 8,000 writers of motion
pictures, broadcast and cable television shows, and, as of a
few weeks ago, new media. And the question is asked, ``Who
writes this stuff?'' the answer is, for better or for worse,
``We do,'' including ``The Graduate.''
[Laughter.]
Mr. Verrone. I had hoped to bring some of the Southern
California weather with me, but it appears its flight was
delayed. This is not a problem for today's hearing.
We are here to talk about the subject of the future of the
Internet. As you know, we at the Writers Guild recently
completely a 100-day strike over the place of entertainment
writers in that future. Also, I believe, I am the only
panelists to have written a feature film scrip about a robot
poker tournament in space Vegas in the year 3009, so I think my
expertise on the future is unquestionable.
[Laughter.]
Mr. Verrone. Future of the Internet--thank you for
laughing--the future of the Internet is a cautionary tale. I
begin by invoking the Ghost of New Media Past. It is, of
course, April, so, naturally, Dickens' ``Christmas Carol''
comes to mind.
A hundred years ago, new media was motion pictures; 75
years ago, radio; 50 years ago, it was broadcast television. I
started working in the entertainment industry about 22 years
ago, writing for Johnny Carson. And, like other 7-year-olds at
the time, I saw almost 30 separate companies independently
producing and distributing television on the new media of cable
TV. Yet, today we are down to about seven vertically integrated
conglomerates controlling, not only cable TV, but also
broadcast TV, film, radio, and even the news. Concentration of
power was triggered by a series of policy choices; most
recently, about 15 years ago, when the FCC began a process of
unraveling the financial and syndication rules of FIN-SYN,
allowing production and distribution to be jointly owned. As a
result, media companies have consolidated, conglomerated, and
congealed into a handful of multinational entities that today
employ nearly everyone working in our industry.
The axiom in Hollywood is that content is king, but those
who control access to the king control the kingdom. Because of
Federal regulations, or lack thereof, that control is in the
hands of neither the consumer-viewer nor the content creators,
but, rather, the distributors.
Which bring us to the Ghost of New Media Present; namely,
the Internet. The jurisdiction and compensation for our content
on the Internet was what we fought for and won in our recent
strike. But, what was most notable about the strike was not
what we won; rather, how we won it. We used the Internet to win
the Internet. When traditional media is in the hands of the
same corporations that employ you, it's a little hard to get
your message out. We had 4,000-person rallies that got less and
later coverage on the local news than a dog wedding.
As such, the Internet proved to be a powerful tool for
communication. E-mails, blogs, Websites, podcasts, video clips
were passed along the Net, giving our members updates and
informing the world about our cause. In an era of so-called
``reality television'' and user-generated content, the studios
had hoped to show that they could create programming without
writers, yet the strike proved that we could use the Internet
to create programming without the studios.
The Internet holds incredible potential to resurrect a
vibrant industry of independent creators with free access to,
and distribution of, democratic, with a small ``d,'' content.
And so, we look to the Ghost of New Media Future. Will the
Internet's open and free-speech forum be turned into a walled
garden of content control? Will entertainment information and
marketing platforms be available to all, or just to those who
can afford to pay for them? Will the new media be dominated by
the gatekeepers that dominated the old media, be they
multinational monopsonies of TV and film or regional duopolies
of cable and television service? Stay tuned. Hopefully, there
is a happy ending, one which is open to diverse, independent,
and original voices and visions, where consumers can pick and
choose for themselves the content and services they want, where
content is king, and the king roams free.
This future, we believe, relies on net neutrality. The
policy decisions that triggered the consolidation of old media
have not yet been made for new media. There is still time to
protect the rights of content producers and consumers. We need
to dethrone the gatekeepers and once more make content king.
We, at the Writers Guild, West, believe that the Internet
Freedom Preservation Act ensures that future. We support it. We
also support public investment in the broadband networks. The
show must go on, and it must be taken on the road.
In an industry filled with oxymoron, from jumbo shrimp to
Hollywood accounting, we believe we must win a fight for
neutrality.
I will reserve the rest of my time if any of you have any
screen plays that you'd like me to read.
[Laughter.]
[The prepared statement of Mr. Verrone follows:]
Prepared Statement of Patric M. Verrone, President,
Writers Guild of America, West
Thank you Chairman Inouye, Vice Chairman Stevens, and members of
the Committee.
My name is Patric M. Verrone, and I am the President of the Writers
Guild of America, West. We represent nearly 8,000 writers of motion
pictures, broadcast and cable television shows, and, as of a few weeks
ago, new media.
Thank you for inviting me to speak on the subject of ``The Future
of the Internet.'' As you know, we recently completed a 100-day strike
over the place of entertainment writers in that future. Also, I believe
I am the only panelist to have written a film about a robot poker
tournament in space Vegas in the year 3009 so I think my expertise in
the area is unquestionable.
The future of the Internet is a cautionary tale. I begin by
invoking the ghost of new media past. A hundred years ago, that was
motion pictures. Fifty years ago, it was broadcast television.
I started working in the entertainment industry 22 years ago.
Almost thirty separate companies independently produced and distributed
television on the ``new media'' of cable TV. Today we are down to about
seven vertically integrated conglomerates, controlling not only cable
TV, but also broadcast, film, and even news.
This concentration of power was triggered by a policy choice. About
15 years ago, the fcc began the process of unraveling the financial and
syndication rules (or FIN-SYN) allowing production and distribution to
be jointly owned.
As a result, media companies consolidated, conglomerated, and
congealed into the handful of multinational entities that today employ
nearly everyone working in our industry and decimating independent
production and content diversity.
The axiom in hollywood is that ``content is king'' but those who
control access to the king, control the kingdom. Because of Federal
regulations--or lack thereof--that control is in the hands of neither
the consumer nor the content creators, but the distributors.
This brings us to new media present--namely, the Internet.
Jurisdiction and compensation for our content on the Internet was
what we fought for--and won--in our strike. What was most notable about
our strike was not what we won, but how we won.
We used the Internet to win the Internet.
When traditional media is in the hands of the same corporations
that employ you, it's hard to get your message out. We had four
thousand attend rallies that got less--and later--coverage on the local
news than a dog wedding.
As such, the Internet proved to be a powerful tool for
communication. E-mails, blogs, websites, podcasts, and video clips were
passed along on the net, giving our members updates and informing the
world about our cause.
Through the ``speechless'' campaign, a series of online videos in
which no words were spoken, the public saw the crucial role writers
play in media creation.
In an era of so-called reality television and user-generated
content, the studios hoped to show that they could create programming
without writers, but the strike proved only the opposite: that writers
could create programming without studios.
The Internet holds incredible potential to resurrect a vibrant
industry of independent creators with free access to, and distribution
of, democratic (with a small d) content.
And so we look to the new media of the future.
Will the Internet's open and free speech forum be turned it into a
walled garden of content control? Will entertainment, information, and
marketing platforms be available to all or just those who can afford to
pay for them? Will the new media be dominated by the gate keepers that
dominate the old media (be they multinational monopsonies of TV and
film or regional duopolies of cable and telephone service)?
Thankfully, there is a happier ending. One which is open to
diverse, independent, and original voices and visions. Where consumers
can pick and choose for themselves the content and services they want.
Where content is king, and the king roams free.
But this future relies on ``net neutrality.''
The policy decision that triggered the consolidation of old media
has not yet been made for new media. There is still time to protect the
rights of content producers and consumers. We need to establish clear
net neutrality rules to ensure that the Internet remains a level
playing field for all. We dethrone the gatekeepers and once more make
content king.
We at the writers guild west believe that the Internet freedom and
preservation act ensures that future and we support it.
In an industry filled with oxymorons from jumbo shrimp to Hollywood
accounting, we must win the ``fight for neutrality.''
The Chairman. I thank you very much.
Now may I recognize Ms. Bateman.
STATEMENT OF JUSTINE BATEMAN, ACTRESS, WRITER, PRODUCER AND CO-
FOUNDER, FM78.tv
Ms. Bateman. Thank you, Chairman Inouye, Vice Chair
Stevens, and other members of the Committee. I want to thank
you for your service to this country, first of all, and I'm
honored to be asked to testify today.
Net neutrality and an open online marketplace are critical
to the future of the Internet and to the preservation of our
rights. My name is Justine Bateman, and I am an actress,
writer, and producer. I've acted in many projects, from TV's
``Family Ties'' to, more recently, ``Desperate Housewives,''
and am a founding partner of FM78.TV, a new online media
venture.
When I started acting, in the early 1980s, creativity in TV
and film was still rampant, and the innovation of ideas and
performance were exalted. The demise of this creative setting
is directly proportional to the increase of media
consolidation, which is, in large part, due to the repeal of
the financial interests and syndication rules. Now we have too
many executives, too many notes, until there is no artistic
voice, no point of view, and little entertainment value left in
the projects we work on. On top of this, there are fewer jobs.
In today's TV market, a show like ``Family Ties'' would
never make it to TV. Media companies not only have a monopoly
over distribution, but they insist on ownership and control of
content which strongly interferes with the production of high-
quality creative product.
Corporate consolidation has actually pushed the audience
away from the traditional media outlets and driven them to the
Internet and videogaming world. In May 2007, the online video
market reached 8 billion streams. Download revenue from TV and
film is expected to reach $3 billion in 2010. And gaming
reported a $17.9-billion revenue in 2007. This is why, a few
months ago, I, along with three other content creators, started
FM78.TV to make and distribute professional high-quality
content directly for the Internet. We hope we can find a
faithful audience online, as other Internet innovators have,
and not be stymied by a private taxation, if you will, by the
telecom companies.
The Internet has been defined by innovation. The Internet
itself was a product of American innovation. Google was
created, as has been said, in a garage, by two college
students; eBay was created by a hobbyist. How successful might
those two sites have been without the freedoms we enjoy on the
Internet today?
In entertainment, I believe we're on the verge of a
creative renaissance, and the Internet is the grid upon which
the renaissance can rest, because, unfortunately, the business
grid of TV and film today cannot support that. Traditional
media is now like a swimming pool over which a pool cover has
been placed, causing those wild ducks that used to swim around
at night in your pool to go elsewhere. And that's a true story
about my pool, and I'm sorry we don't see those ducks anymore.
Those ducks, I'm sure, have now found an open body of water in
which to swim, much like we content creators have found open
distribution on the Internet. And the idea of your site
succeeding or failing being based on whether or not you pay the
telecom companies enough to carry your material or to allow
quick access is appalling. And, honestly, I can't help but
think of extortion when I imagine that kind of arrangement.
Net neutrality will allow for we, creators, to continue
owning and controlling our content in a way we have not been
able to since the repeal of the financial and syndication rules
of our industry. A whole new class of small-business owners
will emerge, providing thousands of new jobs in a sector that
desperately needs them. And with innovation comes competition,
and net neutrality would ensure a level playing field for that.
I've heard the arguments against net neutrality. First and
foremost, I do not believe that net neutrality is government
regulation. By requiring the telecom companies to allow access
and to not discriminate against any legal content on the
Internet, the government is clearly stating its intention for
all Americans to continue to freely access content on the Web.
And, second, piracy is obviously a major problem around the
world. And, of course, the Internet has exacerbated the problem
of illegal downloading. I applaud the work of the MPAA, the
copyright allowance, and others to ensure creators are
protected. I understand the threat of piracy, that the content
I create can be stolen. All new-content creators understand
this. But, the solution is not in establishing new rules that
may prevent me from competing at all. Instead, let the market
continue to find solutions, such as digital watermarking, and
define ways to generate income from sponsors that decrease the
financial problems of piracy, but does not restrict
competition.
In conclusion, I want to tell you, I am a big fan of
capitalism. I know these companies here want to make money, as
do I. They are, after all, being responsive to their
stockholders and their interests. But, trying to restrict
Internet--constrict Internet access, I don't believe that's a
viable revenue option.
And, frankly, not to steal any thunder from the Christian
Coalition, but the idea of these corporations coming together
to attempt to constrict access reminds me of the story of the
Tower of Babel, where large forces conspired to unite and do
what they pleased. The fear was that ``now nothing they propose
to do will be withheld from them.'' Well, we know how that
story ended.
Frankly, I don't believe for a second, that any on this
Committee really, truly want to block or constrict the flow of
information, education, or creativity to the American people.
And I hope your support of net neutrality will dramatically
illustrate to the American public your continued support of
their freedoms.
Thank you very much for your time and for the honor of
addressing you.
[The prepared statement of Ms. Bateman follows:]
Prepared Statement of Justine Bateman. Actress, Writer, Producer,
and Co-Founder, FM78.tv
Thank you, Chairman Inouye, Vice Chair Stevens, and other members
of the Committee. I first want to thank you for all your service to
this country and I am honored to have been asked to testify today. Net
neutrality and an open online marketplace are critical to the future of
the Internet and to the preservation of our rights.
My name is Justine Bateman and I'm an Actress, Writer, and
Producer. I have acted in many projects, from TV's ``Family Ties' to
more recently, ``Desperate Housewives,'' and I am a founding partner of
FM78.tv, a new on-line media venture.
When I started acting in the early 1980s creativity in TV and film
was still rampant and innovation of ideas and performance were exalted.
The demise of this creative setting is directly proportional to the
increase of media consolidation, which is in large part due to the
repeal of the financial interest and syndication rules. Now we have too
many executives and too many notes given until there is no artistic
voice, no point of view, and little entertainment value left in the
projects we work on. On top of this there are fewer jobs. In today's TV
market a show like Family Ties, may never make it to TV. Media
companies not only have a monopoly over distribution, they then insist
on ownership and control of content which strongly interferes with the
production of hi-quality, creative product.
Corporate consolidation has actually pushed the audience away from
the traditional media outlets and driven them to the Internet and video
gaming world. In May 2007, the online video market reached 8 billion
streams. Download revenue from TV and film is expected to reach $3
billion by 2010. And gaming has reported a $17.9 billion in revenue for
2007.
That is why a few months ago, I, along with three other content
creators, started FM78.tv--to make and distribute professional, high-
quality content directly for the Internet. We hope we can find a
faithful audience on-line as other Internet innovators have and not be
stymied by a private taxation, if you will, by the telecom companies.
The Internet has been defined by innovation; the Internet itself was a
product of American innovation. Google was created in a garage by two
college students. EBay was created by a hobbyist. How successful might
those two sites have been without the freedoms we enjoy on the Internet
today?
In entertainment, I believe we are on the verge of a creative
renaissance and the Internet is the new grid upon which this
renaissance can rest, because unfortunately the business grid of TV and
film today cannot support that. Traditional media is now like a pool
over which a pool cover has been placed causing those wild ducks that
used to swim around in your pool to go elsewhere. (True story about my
pool. I'm sorry we don't see those ducks anymore.) Those ducks now I'm
sure have found an open body of water in which to swim, much like we
content creators have been found open distribution on the Internet. And
the idea of your site succeeding or failing based upon whether or not
you paid the telecom companies enough to carry your material or allow
quick access is appalling. Honestly, I can't help but think of
extortion when I imagine that kind of arrangement.
Net neutrality will allow for we creators to continue owning and
controlling our content in a way that we have not been able to since
the repeal of the financial and syndication rules. A whole new class of
small business owners will emerge, providing thousands of new jobs in a
sector that desperately needs them. And with innovation comes
competition. Net neutrality would insure a level playing field for
that.
I have heard the arguments against net neutrality.
First and foremost, net neutrality is NOT government regulation. By
requiring the telecom companies to allow access and to not discriminate
against any legal content on the Internet, the government is clearly
stating its intention for all Americans to continue to freely access
content on the Web.
Secondly, piracy is obviously a major problem around the world and
of course the Internet has exacerbated the problem of illegal
downloading. I applaud the work of the MPAA, the Copyright Alliance and
others to insure creators are protected.
I understand the threat of piracy; that the content I create can be
stolen. All new content creators understand this. But the solution is
not establishing new rules that may prevent me from competing at all.
Instead, let the market continue to find solutions, such as digital
watermarking, and to find ways to generate income from sponsors that
decrease the financial problems of piracy but does not restrict
competition.
In conclusion, I want to tell you that I am a big fan of
capitalism. I know these companies here want to make money, as do I.
They are after all being responsive to their stockholders and their
interests. But trying to constrict Internet access? I don't believe
that that is a viable revenue option. Frankly, and not to steal any
thunder from the Christian Coalition, but the idea of these
Corporations coming together to constrict access reminds me of the
story of the Tower of Babel where large forces conspired to unite and
to do what they pleased. The fear was that ``now nothing they propose
to do will be withheld from them.'' (Gen 11:4). Well, we all know how
that story ended. Finally, I don't believe for a second that any of you
want to block or constrict the flow of information, education, or
creativity to the American people and I hope your support of net
neutrality will dramatically illustrate to the American public your
continued support of their freedoms. Thank you very much for your time
and for the honor of addressing you all.
The Chairman. I thank you very much, Ms. Bateman.
Mr. McSlarrow?
STATEMENT OF KYLE McSLARROW, PRESIDENT AND CEO, NATIONAL CABLE
& TELECOMMUNICATIONS ASSOCIATION
Mr. McSlarrow. Thank you, Mr. Chairman and distinguished
members of the Committee.
We've heard from several representatives of the content
community, or those whose voices want to be heard. And I want
to come back to that in a second. But, I do think, as many
members have said in their opening statements, it's important
to think about all of this from the perspective of the
consumer.
When a consumer sits down in front of a computer and turns
on their broadband service, what is it they actually
experience, and what have they experienced over the last 5
years? Over the last 5 years, they sit down, it's always on,
they have an increasing array of Websites, they have blog
sites, they have social networking sites, they have all kinds
of applications--obviously, we've talked about Google a number
of times today--search engines, applications that people didn't
even dream about. And when they sit down at that computer, it
all just works. It's always on. It's there. People love their
broadband service.
On the other side of that computer, it's the Wild, Wild
West. You have spam, viruses, denial-of-service attacks. One my
larger members defeats, every 2 days, a billion spam e-mails.
And one of my smaller operators does a billion each month.
You've got the problem, in certain areas of networks, where
just a very few people are consuming such enormous amounts of
bandwidth that it's actually slowing down the system for the
vast majority of users. And it's a small enough number
sometimes that network operators are actually on a first-name
basis with these folks. You've got the emergence of peer-to-
peer traffic, which--as I've said previously, technology is
agnostic; it's not bad or good, it's the uses to which you put
it. Peer-to-peer is often used by many of my companies who
partner with peer-to-peer, but it's also an emerging
engineering challenge that people are only coming to grips
with, and you've got every network operator in the country--
phone companies, cable companies, wireless operators--who are
trying to manage congestion on the network, and trying to
manage, particularly, peak congestion.
Now, I said I would come back to the idea of the voices
that want to be heard. And, with all due respect, I've heard
many statements--some today, and others before this hearing--
that describe a world that is a complete fantasy. Every single
person here has a blog or a Website or has content that has
distribution and has enabled consumers, millions of them around
this country, to enable that content. And no one is blocking
them. The cable industry invested over $100 billion to provide
this country's first nationwide broadband system. We are in
front of 92 percent of American households. They don't all take
it, but it's there.
We want as much content, we want as many applications to
succeed as possible. That's what makes our broadband service
attractive to consumers. And if we ever engaged in conduct that
consumers were outraged about, they do have a choice: they can
go somewhere else. There's at least a phone company, and
usually there's a satellite provider, and now, with the
spectrum being auctioned, there's going to be emerging wireless
broadband services. We all know this.
At bottom, the debate that we've had today has been about
whether or not network management, per se, is some nefarious
practice that has anticompetitive overtones. First of all, let
me just say, there is not just a little or a modest amount,
there is zero evidence that any operator is engaging in
anticompetitive conduct. The case just hasn't been made.
You can criticize, justly--and lots of people have--whether
or not the network management techniques used today are the
best ones. I think that's fine. I'm not the least defensive
about it. And I should note that many telephone/cable
operators, Internet applications, providers, peer-to-peer
networks are coming together to try to see whether or not there
are better ways of: (a) providing disclosure to consumers, and
(b) developing new techniques. That's all good. But, that's all
taking place in the marketplace.
So, at bottom, I don't think there's a problem. I think
this committee is absolutely right to continue exercising
oversight. Shining a spotlight on this is a good thing. But, I
don't think we're at a stage where there is any market failure
that justifies government intervention.
Thank you very much.
[The prepared statement of Mr. McSlarrow follows:]
Prepared Statement of Kyle McSlarrow, President and CEO,
National Cable & Telecommunications Association
Good morning, Chairman Inouye, Ranking Member Stevens and members
of the Committee. My name is Kyle McSlarrow and I am the President and
Chief Executive Officer of the National Cable & Telecommunications
Association. NCTA represents cable operators serving more than 90
percent of the Nation's cable TV households and more than 200 cable
program networks. The cable industry is the Nation's largest provider
of high speed Internet access, making cable broadband service available
to 92 percent of Americans, and has invested $130 billion to build a
two-way interactive network with fiber optic technology. Cable
companies also provide state-of-the-art digital telephone service to
more than 15 million American consumers. Cable operators are committed
to delivering an open and satisfying Internet experience to their
customers, and the dramatic growth in cable broadband subscribers is
evidence of their success in doing so.
The cable industry has consistently demonstrated its commitment to
policies that ensure all Americans have access to affordable broadband.
We supported, for example, proposals advanced by Senator Dorgan and
Senator Stevens to create a fund tailored to expanding broadband into
unserved areas. We support Senator Inouye's Broadband Data Improvement
Act, because we believe that improving Federal data collection and
dissemination regarding where broadband services have been deployed in
the United States is necessary in order to achieve the goal of
ubiquitous broadband availability for all Americans. And we continue to
support:
Tax credits or other tax incentives to providers that build
out in rural areas that are unserved by an existing broadband
provider.
Reform of the RUS broadband loan program so that funding is
targeted specifically to unserved areas.
Expansion of the FCC's Lifeline and Link-Up Programs to help
ensure that broadband access is extended to low-income
households.
Public-private partnerships to provide broadband in unserved
areas.
We support these initiatives because we recognize that the
government can play an important role in making certain that the
economic and social benefits of broadband connectivity are extended to
all areas of this country, and we look forward to working with you
further to achieve these goals.
But while broadband deployment to every community in America merits
the full attention of policymakers, legislation calling for ``network
neutrality'' or government intervention into the operation of networks
would undermine the goals of broadband deployment and adoption. The
development of the Internet, expansion of broadband networks, and
creation of innovative Internet applications we have seen would not
have occurred at such a rapid pace if providers were restricted in how
they could engineer their networks to accommodate these dynamic
developments. The government's consistent light regulatory touch since
the introduction of broadband has worked. And only that continued
regulatory freedom is likely to spur the investment and innovation that
consumers have come to expect.
Today, I would like to focus on three points that illustrate why
the Internet and broadband services should not be subject to greater
and more intrusive government regulation.
First, cable broadband providers have demonstrated and remain
committed to providing Americans the very best broadband service
available.
Second, every cable modem subscriber today can access the content
he or she seeks over the Internet. Broadband providers do not block
access to content. Reasonable network optimization techniques not only
enable the growth and development of the Internet, they protect
consumers and their legitimate expectations.
Finally, the national policy of leaving the Internet unregulated
has been a resounding success. Government intervention in broadband
network management would only slow the pace of innovation and prevent
the natural development of traffic solutions that is already occurring
today.
I. Cable Brought Broadband to America
The industry's commitment to the deployment of broadband is
reflected in the plain statistics. By any benchmark, the cable industry
is leading efforts to spur broadband use and deployment.
Investment. The cable industry has done more to stimulate broadband
growth and innovation than any other industry. Cable operators have
invested $130 billion in private capital since the passage of the
Telecommunications Act of 1996 to build broadband networks across the
United States. Today 92 percent of American households, or about 117
million homes, have access to cable broadband service,\1\ including 96
percent of American homes to which cable television service is
available.\2\ This investment and expansion took place without any
government subsidies.
---------------------------------------------------------------------------
\1\ National Cable & Telecommunications Association, Broadband
Deployment Statistics (reporting that cable broadband had passed
117,700,000 U.S. housing units as of December 2007) available at http:/
/www.ncta.com/Statistic/Statistic/CableBroadbandAvailability.aspx.
\2\ High-Speed Services for Internet Access: Status as of June 30,
2007, Report, Industry Analysis & Tech. Division, Wireline Competition
Bureau, at 3 (Mar. 2008) available at http://hraunfoss.fcc.gov/
edocs_public/attachmatch/DOC-280906A1.doc (``2007 High Speed Internet
Access Report'').
---------------------------------------------------------------------------
Competition. The cable industry's efforts to deploy broadband have
stimulated tremendous investment in the provision of Internet access by
competing providers, first by telephone companies and now wireless and
satellite companies. This competition has spurred cable broadband
providers and their competitors to develop better and better networks
and applications to meet consumer demand and compete for their
business. As former FTC Chairman Timothy Muris has explained,
``competition [among providers] spurs producers to meet consumer
expectations because the market generally imposes strict discipline on
sellers who disappoint consumers and thus lose sales to producers who
better meet consumer needs. These same competitive pressures also
encourage producers to provide truthful information about their
offerings.'' \3\
---------------------------------------------------------------------------
\3\ Statement of Timothy J. Muris, Foundation Professor, The George
Mason School of Law, before the Workshop on Broadband Connectivity
Competition Policy, U.S. Federal Trade Commission, Feb. 28, 2007, at
12; see id. at 13 (``Introducing new sellers--i.e., competition--can
only improve things from the consumer's perspective. Either the new
producer offers the consumer a better deal (e.g., lower price, better
quality), or it does not get the sale. This ability to shift
expenditures imposes a rigorous discipline on each seller to satisfy
consumer preferences.''); id. at 14-15 (``Competition motivates sellers
to provide truthful, useful information about their products and drives
them to fulfill promises concerning price, quality, and other terms of
sale . . . In a competitive market, a consumer deceived by one seller
on one purchase can always turn to a different seller the next time.'')
(internal citations omitted); id. at 16-17 (noting significant
competition in broadband access market).
---------------------------------------------------------------------------
Most notably, as the availability of broadband service has grown,
the price-per-megabit has fallen significantly, and the speeds cable
broadband offers have shot up dramatically. When cable first offered
high-speed broadband service as an alternative to dial-up access in the
mid-90s, the speeds were approximately 1-1.5 Mbps. Today, most cable
operators offer broadband speeds topping 5 Mbps and some operators,
such as Cablevision and Comcast, offer speeds up to 50 Mbps. Comcast
and Cox Communications also offer a service that provides for
``boosts'' of higher speeds that double the throughput on an on-demand,
capacity-available basis.
Now the cable industry is on the verge of making the next leap--
from ``broadband'' to ``wideband''--with a technology which can enable
dramatically higher download and upload speeds well above 100 Megabits
per second. Several weeks ago, for example, Comcast launched a
``wideband'' service in Minneapolis-St. Paul that offers speeds of 50
Megabits per second. Comcast expects to have wideband available to 20
percent of its systems by year-end 2008 and to all homes passed by mid
2010.
Increased Use and Demand. The high quality and easy availability of
cable broadband has led to the widespread adoption of broadband use.
Today, the cable industry has more than 35 million broadband
customers.\4\ Overall, approximately 64 million broadband households
nationwide have broadband service, and that number continues to grow.
---------------------------------------------------------------------------
\4\ National Cable & Telecommunications Association, Broadband
Deployment Statistics (reporting that the total cable high-speed
broadband customers reached 35,600,000 as of December 2007) available
at http://www.ncta.com/Statistic/Statistic/Statistics.aspx.
---------------------------------------------------------------------------
New Content, Web Services, and Applications. The efforts of
broadband network providers to build larger and faster networks have
helped ensure the success of countless numbers of new Internet
businesses and applications--online video services, social networking
websites, data-sharing services, and online interactive game services,
to name a few. Despite concerns about alleged limited access to
broadband, use of Internet video on demand has grown at the most
dramatic rate. In July 2006, 107 million Americans watched video online
and about 60 percent of Internet users downloaded more than 7 billion
videos off the Internet.\5\ In February 2008, nearly 135 million U.S.
Internet users spent an average of 204 minutes viewing 10.1 billion
online videos. YouTube represented 34 percent of those online videos,
or nearly 3.5 billion in total.\6\ To put it into context, in 2006,
YouTube consumed as much bandwidth as the entire Internet consumed in
the year 2000.\7\
---------------------------------------------------------------------------
\5\ FCC Adopts 13th Annual Report to Congress on Video Competition
and Notice of Inquiry for the 14th Annual Report, News Release at 4
(Nov. 27, 2007) available at http://hraunfoss.fcc.gov/edocs_public/
attachmatch/DOC-278454A1.pdf.
\6\ Todd Spangler, Net Video Views Topped 10 Billion in February,
MultiChannel News, Apr. 16, 2008.
\7\ Michael Dell, Founder and Chairman, Dell Inc., Keynote Address
at 2007 Consumer Electronics Show (Jan. 9, 2007) (transcript available
at media.podtech.net/media/2007/01/PID_001851/Podtech_v_1875-ces-2007-
dell-launches-.html).
---------------------------------------------------------------------------
Television networks are now offering cable modem and other
broadband customers video online, such as NBC Universal and News
Corp.'s new Hulu service. Book retailers are now offering online
digital novels; and music sales websites, such as iTunes, continue to
grow. Social networking websites, where users share home videos,
pictures, and music content, are also on the rise--in 2007, an
estimated 126.5 million people in North America participated in an
online social networking website.\8\ Internet commerce also continues
to grow. Last year, over $135 billion was spent purchasing goods and
services over the Internet.\9\
---------------------------------------------------------------------------
\8\ Jon Swartz, Social-networking sites going global, USA Today,
Feb. 10, 2008.
\9\ Quarterly Retail E-Commerce Sales, 4th Quarter 2007, U.S.
Census Bureau News Release (Feb. 15, 2008) available at http://
www.census.gov/mrts/www/data/pdf/07Q4.pdf.
---------------------------------------------------------------------------
For years, net neutrality proponents have argued that without
government intervention, broadband providers would stifle competing
services and content providers; Internet development and usage would
stagnate; and consumers would be unable to use their broadband
connections to download video or access other emerging applications. In
fact, cable's investment in broadband has driven innovation and
investment in new content and applications at the edge--the exact
opposite of what was predicted by advocates of net regulation.
There is no better proof that there presently exists no ``problem''
needing a ``solution'' than YouTube. YouTube would have been a pipe
dream in 2002. Six years later, however, YouTube--the proverbial ``two
guys in a garage'' who allegedly could not survive, let alone thrive,
unless the Internet were regulated--has become a multi-billion dollar
enterprise. And YouTube is now owned by Google, which itself has grown
to become one of the largest companies in the world with a market
capitalization of $169 billion.
Here's an incontrovertible truth: the staggering growth of these
companies would not have occurred without cable's investment in and
deployment of the reliable high-speed broadband service that provides
the ecosystem in which Google, YouTube, Yahoo! and other Internet
services can flourish.
II. Network Optimization Enhances and Enables the Internet Experience
In 2006, I testified before this Committee and stated that cable
operators do not and would not block subscribers' access to any lawful
content, applications or services. That statement remains true today.
Cable modem subscribers have the ability to do anything they want to on
the Internet. They can download or stream videos, upload and send
pictures to friends, or call family across the world. They can also
attach gaming devices, or any other computing device they want to use
to the network. They can use file-sharing software from peer-to-peer
networks. If they couldn't do what they wanted, they would soon not be
cable modem subscribers. They would go to our competitors.
Cable subscribers can enjoy the most advanced and cutting-edge
Internet sites and applications because of the extensive efforts cable
operators constantly undertake to make all content and applications
flow smoothly and work seamlessly together over the network. In 1999,
there were only 2 million households with broadband service in the
United States; today there are approximately 64 million. This is a
great success story--but with this success comes the need to manage the
network so that every household has good user experience.
Cable providers built a smart infrastructure that has the
capability to evolve and meet the challenges of multimedia, file
sharing, and other bandwidth-intensive applications. But cable
broadband subscribers currently enjoy the full benefits of broadband
only because cable operators manage their networks on a content-
agnostic basis to provide seamless connectivity, deter spam and
viruses, and make sure that a tiny minority of users don't slow down
the Internet for everyone else. Various estimates are that as few as 5
percent of customers use from 50 to 90 percent of the total capacity of
the network. In Japan, it is estimated that 1 percent of Internet users
consume 47 percent of the total Internet traffic.\10\ Faced with these
voracious bandwidth consumers, cable operators may engage in
reasonable, content-agnostic network management practices--triggered by
objective criteria based upon network traffic levels--to ensure that
the relatively few customers who utilize bandwidth-heavy applications
do not degrade or otherwise adversely affect broadband Internet access
for the vast majority of customers.
---------------------------------------------------------------------------
\10\ George Ou, citing Haruka Saito, Japanese Counselor for Telecom
Policy, http://blogs.zdnet.com/Ou/?p=1063.
---------------------------------------------------------------------------
There have been some recent concerns that network management
practices affecting certain high-bandwidth-consuming peer-to-peer (P2P)
applications are ``discriminatory.'' P2P traffic can consume a
disproportionately large amount of network resources--far, far more
than any other Internet use. If even a small fraction of customers are
using these bandwidth-intensive applications at the same time, it can
interfere with the ability of the vast majority of all other customers
in that area to surf the web, watch streaming video, make voice-over-IP
calls, or engage in other routine uses of the Internet.
Providers can't build their way out of this problem--in spite of
increasing capacity, many P2P protocols are written specifically to
commandeer as much bandwidth as is available. Instead, providers
optimize their networks in order to balance the needs of all of their
customers. Far from inhibiting access, smart network techniques protect
the ability of our customers to make the greatest and most flexible use
of the Internet. They are a reasonable response to an identified
congestion problem that has the benefit of allowing all other
applications--particularly latency-sensitive applications like VoIP and
streaming video--to work better. As the Institute for Policy Innovation
recently stated, ``[i]n almost all cases, network management today is
unnoticed by consumers. The opposite, a total lack of management, would
not be true. If network operators were precluded from managing their
networks, consumers would be negatively affected.'' \11\ Sound network
management is essential to ensuring a stable broadband platform.
Google, Yahoo!, Amazon, and service providers like Vonage could not
carry on their businesses if bandwidth-consuming applications were
allowed to block customers from accessing their Websites or completing
their transactions. Because of network management, such businesses can
develop business models that hinge on the expectation that their
service will not be crowded out by congestion caused by heavy
bandwidth-using software. Far from being ``neutral,'' a network that is
not managed simply allows those who want to demand all the bandwidth
for themselves to do so unchecked.
---------------------------------------------------------------------------
\11\ Broadband Industry Practices, WC Docket No. 07-52, Institute
for Policy Comments at 2 (filed Feb. 13, 2008).
---------------------------------------------------------------------------
Reasonable network management practices are also vital to combating
the well-documented, illegal distribution of copyrighted material on
the Internet. We cannot ignore the problem of piracy. It is a problem
that affects not just broadband service providers, legitimate broadband
application providers and content providers, but also law-abiding
consumers. Ultimately they are the ones that bear the burden of
congestion caused by those who abuse their network access to engage in
the widespread distribution of infringing works. Technology is
agnostic, but, according to one source, 90 percent of P2P downloads are
pirated material.\12\ Broadband providers, content owners and others
all have a stake in exploring technology solutions that address piracy
in ways that respect our customers' expectations and respect the
copyright owner's rights, not simply to curtail congestion but for
reasons of fairness to those who invest in content and make an
important contribution to our economy. Government action that would
inhibit development of innovative approaches to thwarting piracy and
enhancing the online experience for the vast majority of Internet users
would harm content creation and ultimately consumers.
---------------------------------------------------------------------------
\12\ Associated Press, Peer-to-peer networks go legit, but piracy
is still rampant, siliconvalley.com, March 14, 2008, available at
http://www.siliconvalley.com/latestheadlines/ci_8575851.
---------------------------------------------------------------------------
So, is there evidence that these challenges are insurmountable and
require more government regulation? Quite the contrary. The same
technological innovation that gives rise to some of these challenges
has produced creative ways to fight spam and viruses. The same private
sector collaboration that allowed the countless number of networks that
make up the Internet to exchange traffic and engage in peering, has and
continues to focus on new challenges.
Some P2P developers are creating new ways to make that technology
more bandwidth-efficient and network-friendly, so that it may continue
to emerge as a useful way to distribute legal content. Cable companies
and other broadband providers are working hard to find ways to address
concerns about network congestion and create consumer-friendly options
that allow the majority of users to access content at the speeds
needed. The ``P4P Working Group''--a collaborative industry effort to
develop network management solutions that benefit cable and other
broadband operators, P2P software firms, and consumers--is one such
effort.
Broadband providers have also begun testing and dialogue with P2P
applications providers to make networks and P2P applications friendlier
to one another. For example, Verizon has been working with Pando
Networks, a P2P software developer, and the P4P Working Group to
develop a more bandwidth efficient file sharing protocol.\13\ Just last
week, Comcast and Pando announced their intention to lead an industry-
wide effort to create a ``P2P Bill of Rights and Responsibilities.''
\14\ And Comcast and BitTorrent recently reached an agreement in which
Comcast pledged to adopt a capacity management technique based on
individual users' consumption during peak periods rather than based on
a particular protocol.
---------------------------------------------------------------------------
\13\ Peter Svensson, Verizon Gets Cozy With P2P File-Sharers, March
14, 2008, available at http://biz.yahoo.com/ap/080314/p2p_verizon.html.
\14\ Stephen Lawson, Comcast, Pando Call for Pact on P2P Rights,
Apr. 15, 2008, available at http://news.yahoo.com/s/pcworld/20080416/
tc_pcworld/144680.
---------------------------------------------------------------------------
Broadband providers and Internet content and service providers have
mutual incentives to develop workable solutions that enhance customers'
Internet experiences. Cable operators' tremendous investments have laid
the foundation for robust broadband networks that have spurred the
remarkable explosion of new services and innovations on the Internet.
In turn, the vast array of applications and services now available on
the Internet drive more and more people to become broadband users.
III. The Government Should Continue to Refrain From Regulation
Congress should resist calls to interfere with broadband providers'
freedom to manage their respective networks in order to satisfy the
evolving needs of American consumers. Cable modem service has never
been subject to regulation. Six years after the FCC classified cable's
broadband offering as an unregulated information service \15\ and
nearly 3 years after the FCC determined that no regulation was needed
to encourage broadband deployment and preserve and promote Internet
usage and demand,\16\ there has been no evidence of any practices that
would change those conclusions or warrant government intervention
generally or specifically with respect to permissible network
management activities. The disaster scenarios voiced by network
neutrality proponents for many years have never happened. In fact, the
opposite has happened--the Internet is booming without regulation.
There is quite simply no problem requiring a government solution.
---------------------------------------------------------------------------
\15\ Inquiry Concerning High-Speed Access to the Internet Over
Cable and Other Facilities, 17 F.C.C.R. 4798 (2002), aff'd sub nom.
Brand X Internet Servs. V. FCC, 545 U.S. 967 (2005).
\16\ Appropriate Framework for Broadband Access to the Internet
over Wireline Facilities; Review of Regulatory Requirements for
Incumbent LEC Broadband Telecommunications Services; Computer III
Further Remand Proceedings: Bell Operating Company Provision of
Enhanced Services; 1998 Biennial Regulatory Review--Review of Computer
III and ONA Safeguards and Requirements; Inquiry Concerning High-Speed
Access to the Internet Over Cable and Other Facilities; Internet Over
Cable Declaratory Ruling; Appropriate Regulatory Treatment for
Broadband Access to the Internet Over Cable Facilities, Policy
Statement, 20 FCC Rcd 14986, 4 (2005); FCC Press Release, ``FCC
Adopts Policy Statement; New Principles Preserve and Promote the Open
and Interconnected Nature of Public Internet'' (rel. Aug. 5, 2005).
---------------------------------------------------------------------------
Under the guise of preventing discrimination, ``net neutrality''
proponents would have the government determine which network management
techniques are permissible. But putting every network management
strategy up for debate before regulators would severely hamper the
ability of network providers to ensure high-quality and reliable
Internet access for their subscribers. Depriving network operators of
certain bandwidth management tools only makes the network less
efficient for everyone. Ultimately, interfering with an operator's
ability to manage its network would harm consumers and prevent them
from accessing the content they desire. Adept network optimization
techniques are fundamental to creating and preserving the stable
``ecosystem'' for online service providers that ensures an optimal
customer experience.
Government intervention in a fast-changing technological world
could result in very real problems developing very quickly. Network
management practices are constantly changing and evolving--as networks
grow, consumer usage patterns change, and new technologies emerge. It
would be impossible for any regulation to keep up with these changes.
Nor does the government have the expertise or resources to second-guess
the thousands of network management decisions broadband network
engineers must make every day. It is far more likely that government
interference in the development of the market could foreclose or
prevent the emergence of cross-industry efforts that are more likely to
get the solutions right.
Conclusion
Misplaced concerns over legitimate and reasonable network
management practices do not justify the enactment of open-ended
regulation of the Internet, particularly where the costs of such
regulation are foreseeable and substantial. Given the growth of
broadband competition and the breathtaking pace of technological
change, government intervention is unwarranted. As the Federal Trade
Commission has warned, regulation of Internet access at this stage of
market development could have ``potentially adverse and unintended
effects,'' \17\ including reduced product and service innovation. And
net neutrality requirements would frustrate the Federal policy of
``preserv[ing] the vibrant and competitive free market that presently
exists for the Internet . . ., unfettered by Federal or State
regulation.'' \18\ Today's hands-off policy has given us the
flexibility to innovate and respond to consumer demand. By contrast,
proposals for ``net neutrality'' amount to regulation of the Internet
that would undermine--not promote--consumer choice and welfare.
---------------------------------------------------------------------------
\17\ Broadband Connectivity Competition Policy, Federal Trade
Commission Staff Report, at 11 (June 2007) available at http://
www.publicknowledge.org/pdf/FCC-05-151A1.pdf.
\18\ 47 U.S.C. 230(b)(1).
---------------------------------------------------------------------------
Thank you again for inviting me to speak to you today.
The Chairman. Thank you very much.
And our last witness, Professor Lessig.
STATEMENT OF LAWRENCE LESSIG, C. WENDELL AND EDITH M. CARLSMITH
PROFESSOR OF LAW, STANFORD LAW SCHOOL
Mr. Lessig. Thank you, Mr. Chairman.
I had the honor to be at this Committee's first hearing, 5
years ago, when the words ``network neutrality'' were uttered.
And it's extraordinarily rewarding to see the progress that's
been made in the understanding around this issue in the last 5
and a half years.
But, I do want to start by remarking what strikes me as a
fundamental misunderstanding about the history of the Internet,
which is pressed by the Senators who were to my left earlier
today; in particular, by Senator Sununu.
The Internet began in a context where its code, the
architecture of the Internet, and the regulation of government
through Title II in the narrow-band Internet context, created a
platform of fundamental neutral competition. The technology was
incapable of allowing ISPs to discriminate among content and
applications, and the government took a very active role in
guaranteeing that Internet service providers provided neutral
access to the Internet.
Now, of course, that context has changed dramatically.
Because of changes in regulation, instead of having about 6,000
ISPs in this nation, we essentially have, in any district, one,
maybe two. And so, that context has radically changed. But, as
it has changed, it has changed, not just because the law has
changed; it's changed because the technology has increasingly
enabled providers to discriminate among content and
applications.
So, imagine, for example, if the electricity grid, which,
right now, is a neutral platform--when you plug your Sony TV
in, it doesn't know the difference between that and a Panasonic
TV--imagine if it, when you plugged it in, asked the question
to the television set, ``Are you Sony or are you Panasonic?''
and the price differs depending upon whether you're Sony or
Panasonic, or whether it's a television or a radio, or whether
it's public TV or private TV. The point is, it's possible the
electricity grid would become discriminatory in exactly that
way. And the question is what Congress would do if, in fact,
that's where the electricity grid went.
Now, another point that's been made consistently by those
who oppose network neutrality regulation is, we should sit
around and wait to see the discrimination; and when we see the
discrimination, let's do something about it. But, that point
fundamentally misunderstands how investment decisions are made
in Silicon Valley. In Silicon Valley, investment decisions are
made today depending on what the investors believe the network
will look like in 5 years. And if, today, they believe the
owners of the network will have the freedom to pick and choose
which applications will run or which content will be permitted,
they will not invest in applications today which are
fundamental and different from the kind of applications the
network owners want to allow.
So, it's fundamentally mistaken to say that there's no cost
to competition or innovation or the economy from doing nothing.
The cost is the extraordinary uncertainty investors face about
what the future of the network will look like and what exactly
their opportunity to compete will be.
Now, finally, to the Senators who are still on my right
here, I would say I support, fundamentally, the move to enact
network neutrality legislation. I think, 5 years into this
debate--it's actually 10 years since this issue was first
framed--is long enough, and Congress needs to take a very clear
policy position that supports an infrastructure of abundance
for the network and does not envision the network becoming a
network where owners try to leverage scarcity to produce value.
But, it's extraordinarily important that, whatever
regulation is placed on this network be as minimal and clear as
possible. And I get very anxious with the use of words like
``reasonable'' in this context, without clear specification of
the problem.
So, in my view, the core problem is addressed by the four
principles that Chairman Powell originally envisioned, and
Chairman Martin has adopted, plus one more. And that one
additional principle would ban discriminatory tiering by
network owners for providers of content and applications. And
those, it seems to me, define the minimal regulation necessary
to guarantee the principle to continue an environment of
extraordinary competition that the Internet originally gave us.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Lessig follows:]
Prepared Statement of Lawrence Lessig, C. Wendell and Edith M.
Carlsmith Professor of Law, Stanford Law School
Introduction
Mr. Chairman, and members of the Committee, my name is Lawrence
Lessig, and I am a Professor of Law at Stanford Law School. For more
than a decade, I have been studying the relationship between technology
and Internet policy, and in particular, the relationship between the
architecture of the Internet and innovation. I am honored to have the
opportunity to address the question that is before this Committee--the
future of the Internet.
This is the third time that I have addressed this Committee about
essentially the same question. In October, 2002, I testified about
``network neutrality.'' That was, I believe, the first time that idea
had been presented to this Committee. In February, 2006, I testified at
a hearing devoted to ``network neutrality'' exclusively. And in my
view, the question before this Committee today, ``The Future of the
Internet,'' is directly tied to the future of network neutrality.
Yet while these questions are not new, in my view, Congress has yet
to address them adequately. For the reasons I outline below, this
failure to act continues to threaten the growth and economic vitality
of the Internet. Thus, I would urge Congress to enact legislation that
sets the basic framework for this critical economic infrastructure in a
way that assures the greatest innovation and economic growth. That
framework would embed a design principle that gave birth to the
Internet--network neutrality.
``Network Neutrality''
The term ``network neutrality'' was introduced into the academic
debate by Professor Tim Wu in early 2003.\1\ But the idea behind the
term has been a central focus of network theorists since the early
1980s. ``Network Neutrality'' builds upon a fundamental recognition
about the relationship between a certain network design (what network
architects Jerome Saltzer, David Clark, and David Reed called the
``end-to-end'' \2\ principle) and economic innovation. As former FCC
Chief Economist, Professor Gerald R. Faulhauber, described the
relationship at a Stanford conference in 2000,
---------------------------------------------------------------------------
\1\ Tim Wu, Network Neutrality, Broadband Discrimination, 2 J.
Telecomm. & High Tech. L. 141 (2003).
\2\ 29 See J. H. Saltzer, David Clark, and David Reed,
``End-to-End Arguments in System Design,'' available at ; David P.
Reed et al., ``Active Networking in End-to-End Arguments,'' available
at .
``if I translate this into . . . economics, [``end-to-end''] in
engineering is the equivalent of . . . perfect competitive
market [in] economi[cs]. It's the thing that makes it all
transparent, open, [where] anybody can do anything.'' \3\
---------------------------------------------------------------------------
\3\ Conference Proceedings, The Policy Implications of End-to-End,
Stanford University, December 1, 2000, available at .
``End-to-end'' or, to update the language, ``network neutrality''
is the equivalent of perfect competition because it creates an
environment, or platform, upon which competition among applications and
content happens with minimum interference by the network or platform
owner. Like a traditional marketplace, or a modern stock market, a
neutral network assures that in the negotiation between buyer and
seller, or innovator and consumer, the network itself plays little or
no substantive role. All the power within this negotiation is shifted
to the edge, to those economic actors directly responsible for
innovation and growth in network applications and content--namely,
consumers and innovators.
The original Internet achieved this architecture of competition
unintentionally. The framers of the network's original design were not
economists. They were not focused on building an engine of economic
growth. Yet that was the consequence of a technical design intended to
facilitate development flexibility. A network designed to enable anyone
to develop new applications to run was also a network designed to
maximize competition among applications and content.\4\
---------------------------------------------------------------------------
\4\ See Barbara van Schewick, Architecture and Innovation
(forthcoming MIT Press, 2008). See also Lessig, The Future of Ideas 34-
35 (2001).
---------------------------------------------------------------------------
The reason for this is simple but technical: under the Internet's
original design, there was no easy way within the network to
discriminate among applications or content. The network was built
without the knowledge to discriminate built in. Just as the Post Office
can't cheaply pick and choose which letters to deliver based upon the
sentiments expressed in the letters, so too the original Internet
couldn't easily pick and choose which packets of data to send based on
the content of those packets. It was blind to that content. That
blindness encouraged a wide range of innovation.
This technical feature of the original network is now changing.
Network owners increasingly have the ability to in effect open the
Internet's letters--to peek inside the packets, and choose which go
faster, or which get blocked. And while there are plenty of legitimate
reasons why a network owner might need to ``manage'' network behavior,
there are anti-competitive, or strategic reasons as well. Which reason
motivates a network owner turns upon the business model that the
network owner has adopted--either a business model of abundance and
neutrality, serving whatever legal applications and content users and
innovators want, or a business model of scarcity and control,
leveraging financial return out of the scarcity their gate-keeping role
allows them to create or maintain. If policymakers were confident
network owners were following a model of abundance, there would be less
reason to be concerned about how they manage the packets on their
network. But because policymakers are uncertain about the ultimate
motive for this ``management,'' extensive inquiry into the technical
questions of network management become important.
In my view, Congress could substantially simplify this area by
setting a strong policy in favor of networks with a business model of
abundance and neutrality. A clear set of network neutrality principles
would do just that. If Congress made it perfectly clear that the FCC
had the charge and authority to assure that the providers of this
critical economic infrastructure were deploying this infrastructure
with abundance in view, businesses would conform to that requirement.
The economic question here is much more important than the financial
returns to one particular industry. A powerful and vibrant broadband
infrastructure is crucial to the economic growth of the Nation
generally.
In addressing the question before this Committee, I would offer
four points to consider.
1. The question of effective regulation for critical economic
infrastructure did not begin with the Internet.
Though the Internet is certainly ``new'' within the history of
critical economic infrastructures, the regulatory questions it raises
are as old as the Republic. Throughout our history, policymakers have
weighed how best to encourage the spread of critical economic
infrastructure, recognizing that sometimes subsidy is required, and at
other times, simple regulation is sufficient. The Post Office, for
example, was perhaps this Nation's first communication infrastructure,
and as many have noted, the Federal Government played a critical role
in assuring that that infrastructure supported the rapid growth of
commercial newspaper and periodical publications, both for economic and
political reasons.\5\ Likewise with the telegraph, railroads,
electricity, the national highway system, and telephones: In each case,
the policy question was how best to encourage broad scale, and
relatively inexpensive infrastructure to support critical economic
growth. How, in other words, to encourage an infrastructure of
abundance rather than an infrastructure of scarcity.
---------------------------------------------------------------------------
\5\ See, e.g., Paul Starr, The Creation Ofthe Media 83-113 (2004).
---------------------------------------------------------------------------
Throughout this history, to achieve abundance it has sometimes been
necessary to limit the freedom of infrastructure providers. Common
carrier regulation did that substantially. But even without common
carrier regulation, some limits have been essential to assuring that
the interests of those who build this economic infrastructure are
aligned with the interests of the Nation that depends upon it.
One critical limitation has been upon the ability of infrastructure
owners to discriminate. Consider, for example, the infrastructure for
electricity. As I have testified before, the electricity grid is a
fundamentally neutral network. Innovators (like Sony, or Panasonic) are
invited to develop applications (televisions, and radios) that use that
network. They don't need permission from the network owners (PG&E,
Commonwealth Edison) to deploy those innovations. When you plug your
television set into an outlet, the network doesn't ask (as it well
could, given modern technology) whether the television set is made by
Sony or Panasonic. It doesn't ask whether the function of the appliance
is to provide television or radio service. Instead, so long as
application developers develop appliances that comply with the
protocols of the network, the electricity grid will provide service to
those appliances neutrally. That doesn't mean for free--for obviously,
we all pay for the electricity we consume. It doesn't mean unmetered--
obviously, we pay more if we use more. But it does mean that Sony
doesn't need to pay a special tax to PG&E for the right to develop Sony
television sets, or digital music players. Sony, in this model, is free
to innovate without permission from the infrastructure owners--the
electricity network.
We could of course imagine a different system. And indeed, we could
well build that different system into our electricity grid right now.
The electricity grid could be architected to ask the application who
made it, or what its function is. The network could then decide whether
or how to serve electricity depending upon the answer to that question.
Providers of appliances could then be taxed depending upon the
elasticity of demand for their products. Electricity providers could
then enjoy greater revenue for their product from this tax.
I take it there are few who believe that this alternative
electricity system would be better thanthe system we have today--even
though economists could well describe the conditions under which this
alternative may well be more ``efficient.''
My point, however, is not about whether those conditions obtain,
either for the electricity grid, or the Internet. It is instead to
emphasize the value of being conservative in policymaking in both
contexts. Anyone arguing that the electricity network should be rebuilt
to permit PG&E to discriminate among applications using its network
should bear a significant burden before that change was allowed. And
likewise for anyone arguing that the core competitive feature of the
original Internet should be altered: he or she too should bear a
significant burden before that change is allowed to alter the critical
competitive environment that the Internet presents.
Giving up on network neutrality would be like permitting PG&E to
tax appliance manufacturers for the privilege of using electricity on
its network: No doubt, that would be a boon for PG&E, and its
shareholders. It would not be a boon for the economy.
2. Policymakers should adopt policies that drive network providers
toward business models of broadband abundance rather than
business models that exploit scarcity.
There are at least two clear business models for broadband
deployment--one that drives to broadband abundance, the other that
leverages broadband scarcity to maximize network provider returns.
There is a critical economic justification for government to try to
tilt broadband providers toward the model of abundance.
Again, the broadband Internet is infrastructure. Like electricity
grids, and national highways, it supports a wide range of economic and
social activity. As scholars have demonstrated, private actors
providing public infrastructure but focused on private gain alone would
rationally maximize their own return at the expense of this broader
public gain.\6\ Interventions that create the incentive among
infrastructure providers to support these broader interests produce
real economic return to the economy, even if they mean less financial
return to the infrastructure providers.
---------------------------------------------------------------------------
\6\ See, e.g., Brett M. Frischmann and Barbara van Schewick,
Network Neutrality and the Economics of an Information Superhighway: A
Reply to Professor Yoo, 47 Jurimetrics J. 383-428 (2007); Brett M.
Frischmann, An Economic Theory of Infrastructure and Commons
Management, 89 Minn. L. Rev. 917, 1007 (2005).
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For example, consider by contrast policy decisions affecting the
growth of cable. Though cable television obviously provides valuable
free speech opportunities and economic return through the incentives it
creates to produce new content, it is plausible that cable television
is not a core infrastructure technology, since it does not generate a
diverse range of technology and applications building upon the cable
platform. For this reason, it may well have been sensible for Congress
to grant to cable owners an almost unlimited range of freedom to
structure production decisions as they want, and develop cable
offerings and prices as the market will bear. The product of these
policy decisions is obviously not uncontested--families continue to
resist the bundling of cable providers, making it hard, for example,
for parents to select a mix of content that minimizes advertising;
consumers generally resist significant price increases; developers of
independently produced content point to the radical drop in
independently produced television content after the relaxation of
government ownership regulations. All of these ``problems'' are the
predictable result of allowing cable owners the degree of economic
freedom the law now permits them. And while I share with many the wish
that things were different, I can well understand that there are
limited public policy reasons for regulatory intervention.
But when the platform is not just a video delivery system, but
instead, a general purpose digital innovation platform, the
justification for regulatory intervention changes dramatically. In the
world of entertainment, cable TV is just one option. But in the world
of digital communication infrastructures, the Internet is everything.
And assuring that this infrastructure gets built with maximum capacity
at the lowest cost, and with minimal burdens on application and content
developers, is a critical public policy objective.
3. Investment decisions by venture capitalists are driven by
expectations offuture, not present, behavior.
In both of the earlier hearings at which I was invited to testify
about network neutrality issues, critics of regulation argued that
there was no reason to intervene, because there was no actual evidence
of discrimination. In the 2-years since my last testimony, however,
network owners have provided this Congress with a significant number of
examples of exactly the kind of harmful discrimination that network
theorists have long predicted. In 2005, the FCC was forced to intervene
to stop a DSL provider from blocking voice-over-IP technologies. In
2007, AT&T technologists acted to block the audio of Pearl Jam
performer as he criticized the President in a webcast carried by AT&T.
Verizon has been accused of blocking text messages that it found too
controversial. And most recently, Comcast has been shown to be blocking
particular Internet applications that might compete with its video
service, using network management practices not approved by any
independent standards body. If ``network neutrality'' was ``a solution
in search of a problem'' in 2002, and 2006, the network owners have
been very kind to network neutrality advocates by now providing plenty
of examples of the problem to which network neutrality rules would be a
solution.
But there is one very practical point that this debate about
whether there is significant current discrimination misses. Venture
capitalists don't chose whether to invest in new innovation based upon
what is happening on the Internet today. They base their decisions upon
what they expect behavior on the Internet will be tomorrow. They
decide, for example, whether to fund a new Internet application today
based upon whether they believe the entrepreneur will be able to deploy
that application profitably in 2 or 5 years. That question in turn will
depend upon whether network owners will be free to discriminate against
that application in the future. Or more generally, whether network
owners will be free to tax that application, to extract some portion of
that application's profit. If venture capitalists believe that network
owners will have that freedom tomorrow, then for a certain range of
innovations, they will choose not to invest in that innovation today.
It is for this reason that I and others have consistently argued
that Congress could well be slowing the growth of the Internet economy
by not setting today a clear principle about the rules that will govern
Internet innovation tomorrow. This ``wait and see'' attitude ignores
that sector of the economy that can't afford to wait and see:
investors. The ``wait and see'' argument is thus oblivious to the real
economic costs that uncertainty here creates.
If Congress were clear in its direction to the FCC about the policy
the FCC is required to implement, then any uncertainty about network
owner behavior could be eliminated. And any costs from that uncertainty
could also be eliminated. So long as a simple and clear rule signaled
to the markets that network owners would be in the business of
producing abundant broadband by encouraging innovation rather than
leveraging value from scarcity, markets would react to that signal in a
way that encouraged greater investment in new innovation.
4. Congress should direct the FCC to implement, with the minimal
regulatory intervention necessary, a policy that drives network
providers to a business model ofabundance.
It has been my view for the past decade that Congress needs to
signal a clear policy supporting neutral and abundant broadband growth.
Without doubt, however, such a policy can go too far. The objective of
regulators must be the minimum intervention necessary to steer
broadband providers to a business model of abundance rather than
scarcity, while recognizing the limited competence of regulators in any
field of new technological innovation. That limited competence means
regulators should focus on the behavior that they can monitor well,
using the levers they have over that regulable behavior, so that they
can have confidence about behavior at the layers of the network that
they can't regulate as well.
Congress can achieve that end by setting out clear neutrality
principles in legislation, while charging the FCC with the
responsibility for carrying those principles into effect. Congress'
principle, again, should be to encourage broadband abundance, by
steering providers away from a business model that leverages scarcity.
But in pursing that clear legislative objective, the FCC should proceed
in a careful and limited way, escalating regulatory intervention only
when existing strategies have been proven to fail. Put differently, if
a clear objective has been set by Congress, then an FCC strategy of
``shock and awe'' is both unnecessary and counter productive. Instead,
the interventions by the FCC should be directed to the end of
convincing broadband providers that the legislative policy choice of
Congress will be achieved. A consistent regulatory practice to that end
will convince investors of the only profitable broadband investment
strategy. That will drive providers to the economically optimal
broadband strategy.
As I testified in 2006, in my view that minimal strategy right now
marries the basic principles of ``Internet Freedom'' first outlined by
Chairman Michael Powell, and modified more recently by the FCC, to one
additional requirement--a ban on discriminatory access tiering. While
broadband providers should be free, in my view, to price consumer
access to the Internet differently--setting a higher price, for
example, for faster or greater access--they should not be free to apply
discriminatory surcharges to those who make content or applications
available on the Internet. As I testified, in my view, such ``access
tiering'' risks creating a strong incentive among Internet providers to
favor some companies over others; that incentive in turn tends to
support business models that exploit scarcity rather than abundance. If
Google, for example, knew if could buy a kind of access for its video
content that iFilm couldn't, then it could exploit its advantage to
create an even greater disadvantage for its competitors; network
providers in turn could deliver on that disadvantage only if the non-
privileged service was inferior to the privileged service.
Put differently, ``fast lanes'' on the Internet are only valuable
if ``slow lanes'' are really slow. Depending upon the market, this fact
can create a perverse incentive among network providers not to build
the fastest network possible.
Conclusion
As I testified in 2002 and 2006, the Internet was the great
economic surprise of the 20th century. No one who funded or initially
developed the network imagined it would have the economic and social
consequences that it has had.
But though the success of the network was a surprise, policy-makers
have yet to learn just why it was a success: Built into its basic
design was a guarantee of maximum competition. A free market in
applications was coded into its architecture. The growth of that
network followed from this basic design. The world economy benefited
dramatically from this growth.
The threat facing the Internet today is that network owners will
convince regulators to go back on that original design. Through
regulatory policies that permit broadband providers to act however
their private interests dictate, these regulatory policies would
threaten the economic potential of the network generally. New
innovation always comes from outsiders. If insiders are given both
technical and legal control over innovation on the Internet, innovation
will be stifled.
Unlike many other industrialized nations, we in the United States
have failed to preserve the extraordinary competition among ISPs that
characterized early Internet growth. But despite that loss in access
competition, network neutrality still provided significant opportunity
for application and content competition. The changes now being spoken
of by the effective duopoly of broadband providers will weaken that
application and content competition.
It is my view that any policy that weakens competition is a policy
that will weaken the prospects for Internet and economic growth. I
therefore urge this Committee to secure and supplement the work begun
originally by Chairman Powell, and continued now by Chairman Martin, by
enacting legislation that sets a clear policy to protect the
environment for Internet innovation and competition.
The Chairman. Thank you very much.
Senator Dorgan?
Senator Dorgan. Professor, what you just described, the
four principles plus the nondiscrimination piece, is exactly
what I and others described was necessary when last we took up
this issue, I believe, in a markup. And I believe the vote was
10 to 10--it was tie vote, anyway, either 11 to 11, or 10 to
10--to advance the amendment on net neutrality, or Internet
freedom. I want to make just a couple of brief comments.
First of all, I don't--well, there's been some discussion
here that might lead someone to believe this--I don't think
this is a discussion, at the moment, about bad actors. There
are a lot of good companies out there, they've invested a lot
of money. I'm going to, this evening, turn on a switch and
watch a great hockey game, I hope, on television. I get my
Internet provided by the same company. I mean, there are a lot
of good companies out there doing a lot of things.
I think it's also the case, however, that the companies are
bigger, stronger. I think, when you have fewer competitors,
major competitors in the marketplace, there is a clogging of
the arteries of the marketplace. And, Dr. Hahn mentioned
antitrust enforcement. I would say, if anybody can find the
names of anybody that's really enforcing antitrust laws, be
sure and send them here.
[Laughter.]
Senator Dorgan. I've threatened to put the pictures of
public employees we're paying for antitrust enforcement on the
side of milk cartons, because it appears to me that they have
vanished for a good number of years. So, there is no antitrust
enforcement of any consequence at all.
I want to ask a couple of questions. Obviously, Mr.
McSlarrow, when you were sitting in the audience, you would
have fully expected me to ask this question of you. The
Chairman of the Federal Communications Commission comes to us
and says, ``Here are our principles, and we believe we have the
authority to make them stick.'' Comcast says, ``We don't
believe you have the authority to make them stick. We don't
believe you have that authority at all.'' What's the position
of the Cable Association?
Mr. McSlarrow. I appreciate the question, because I think
the Chairman is modestly confused. The letter that people have
talked about from Comcast is very precise. The question posed
was whether or not the FCC has authority today to enjoin
conduct under any existing rule. And it's not even a close
call. The answer is no. The policy statement that everybody
keeps talking about, which we supported, in terms of the
principles embodied in it, is, by its terms, not a rule and not
enforceable. And the Chairman himself, the day it was issued,
said it's not an enforceable document. That is the question
they answer.
Different question, broader question going to the one I
thought you asked earlier, whether or not the FCC has generic
authority. And there, both the Supreme Court and the FCC itself
has said it's an open question. They have a proceeding, where
they have teed up whether or not, and to what extent, they have
ancillary authority to regulate in this space. And I'm not
going to assume what the answer is, except to say I think they
have some authority. It's probably more limited than people
might imagine. But, whether or not there's a rule on the books
today, there's----
Senator Dorgan. Do you support--does your industry support
the four principles?
Mr. McSlarrow. Not only do we support the four principles,
they embodied our practice----
Senator Dorgan. Do you believe that----
Mr. McSlarrow.--prior to----
Senator Dorgan.--they should be enforceable?
Mr. McSlarrow.--statement. No. I don't.
Senator Dorgan. You support them, but don't believe they
should be enforceable?
Mr. McSlarrow. No, I think if--if there is anticompetitive
conduct or deceptive advertising, I think there are rules on
the books that should and could be enforced.
Senator Dorgan. Professor Lessig, we've heard from some of
my colleagues and others today, ``Let the marketplace decide.
The marketplace will take care of all this.'' I mean, the
marketplace is a wonderful allocator of goods and services.
Having taught some economics, I think it's a terrific allocator
of goods and services. But, I also believe that the marketplace
needs a referee from time to time. But, ``Let the marketplace
decide,'' what's wrong with that argument?
Mr. Lessig. Well, the marketplace is extraordinarily
important, but we have never, historically, relied upon the
marketplace alone when we're talking about critical economic
infrastructure for the Nation. And that's exactly what the
Internet is. The Internet is not just entertainment, it's not
just like the cable system's entertainment component. It is,
instead, infrastructure. And to make sure that infrastructure
encourages the widest range of competition, you need to
guarantee the platform is open to that competition.
The technology used to do that. Now that the technology
doesn't do that, there's an important reason for the government
to insist on that neutrality.
Now, I must insist--my colleague Dr. Hahn has uttered what
is a fundamental confusion about what this issue is about, by
his initial example about Oogle and whether Oogle is free to
charge for advertising. Oogle is at the edge of the network. It
is one of the competitors on the network. I fundamentally
support the right of every competitor on the network to
discriminate however it wants. Let it build its own business
model.
Senator Dorgan. You're talking about content providers.
Mr. Lessig. That's right. What we're talking about is the
platform itself and whether that highway should be able to
discriminate against Ford trucks in favor GM trucks or in favor
of American trucks versus Toyota, foreign trucks. The point is,
that highway has to be neutral. And that what has encouraged
the competition which defines the growth of the Internet.
Senator Dorgan. I'm going to ask you to respond, Dr. Hahn,
but I want to ask you a question as you respond, because you
started by saying, ``What we really need here is just price
freedom.'' So, let me ask you this question. Let's assume the
American Enterprise Institute creates a site, because you want
to make some money, and the site is the American Enterprise
Institute for T-Shirt Sales. And your popular T-shirt that
you're selling has a slogan that says, ``Free Monopolies from
Regulation.'' And the provider takes a look at that and says,
``You know, we don't like that you're implying somehow that
we're a monopoly, so we won't prevent you from getting your
site out, but you're going to have to pay us a little extra to
get your site up, because we don't like you personally, number
one; number two, we don't like the message of your T-shirt, and
we've just decided to charge you more in order to get your
message out.'' So, is that OK? I mean, the marketplace would
then try to figure out what happens to you?
Dr. Hahn. I think the answer is that you need to look at
the broader context. As you pointed out with antitrust earlier,
it's important to look at the competitive structure of the
market. And in this case, we're talking about, I think, the
broadband market. So, let me cite a little data that's in my
testimony.
Prices for digital subscriber lines--that's DSL service--
dropped by roughly a third between 2001 and 2006. In the case
of cable modem service, the quality-adjusted price declined
significantly as cable connection speeds increased
significantly, while prices held steady. The FCC reported that
highspeed lines increased by 22 percent during the first half
of 2007, from 82 million to over 100 million, following a 27-
percent increase, from 65 million to 82 million, during the
second half of 2006. This strikes me, this suggests to me that
the industry is subject to a lot of dynamic competition. It's
not a perfectly competitive lemonade stand, but we need to look
at how the industry is actually behaving and what their----
Senator Dorgan. But----
Dr. Hahn.--incentives to invest are.
Senator Dorgan. But, Dr. Hahn, you didn't respond to my
question. In any event, with response to the statistics you've
described, I could show you data from Asia that shows you pay
half as much to get ten times the speed. So, I mean, I think
that is not germane to the question here.
But, I do ask the question again. Let's assume that you've
set up your American Enterprise T-Shirt Shop because you feel
monopolies are being discriminated against, you don't want
monopolies to be regulated, and so, the service provider--and,
by the way, there aren't a lot of service providers, you
probably have a choice of one or two in your hometown where
you're trying to get this going--and they say, ``You know, we
just don't like you, personally, and we don't like your T-
shirts. We're going to charge you something, a little extra
than we charge others. That's our choice. It's my company. It's
my choice.'' What's wrong with that?
Dr. Hahn. Well, it could violate antitrust laws. You'd need
to--you'd need to take a serious look at that. But, my point
is, not only do you have robust competition in the broadband
market, you have competitive threats from wireless and
satellite, as Mr. McSlarrow said. So, you need to look at the
market in the broader context and see what's actually----
Senator Dorgan. Well, Dr. Hahn, though, no one would
suggest there's robust competition in the marketplace for a
good many Americans. Half of North Dakotans have only two
choices with respect to providers. I mean, you, no one can
really suggest there's robust competition. There's certainty
robust competition out there in every direction with respect to
content providers. I mean, there are people today, in some
garage someplace, with stars in their eyes, because they're
starting up a company, and they want to provide content. But,
that is not the case with providers. And so----
Dr. Hahn. It may not--I'm sorry.
Senator Dorgan. Yes, I would ask a couple of other
questions. But, I want you to be able to respond.
Dr. Hahn. It may not be the case in North Dakota. I concur
with you. But, if you look at the pattern over time, there
seems to be more competition from different kinds of
industries. And if you look at major metropolitan--major
population centers throughout the U.S., they're served by
multiple providers, according to the----
Senator Dorgan. Yes. Well, you know, we had a hearing on a
different subject recently. We had a guy sit at that table from
California, and he said, ``In my office in California''--he was
talking about cable television--``In my office in California,''
he said, ``we have basic tier service with 48 channels''--and I
believe he said 42 of them are owned by the same five or six
major companies that we would expect. So, he said, you know,
this issue of many voices from one ventriloquist. So, whether
it's cable to Internet, we do have more, most everyone would
say we have more concentration.
I want to, without abusing my time, say, Mr. Verrone, I
wish you'd do some writing for me from time to time. Your
testimony was interesting and compelling.
And, Ms. Bateman, thank you, as well. And I understand that
in this area of independent material on the Internet and cable
and so on coming from independence is dramatically decreased.
So, I understand the question that you pose to this committee
about competition on the side of those that are trying to
continue to provide content.
You want to respond, either you or Ms. Bateman?
Mr. Verrone. Well, I want to thank you for complimenting my
testimony. I just hope my staff has run out and reserved the
URL for Oogle.com, because I have a feeling it's going to be
popular after Dr. Hahn's testimony.
Clearly, when we talk about the fundamental considerations
here of competition, and when you're dealing in the industry in
which Ms. Bateman and I work, we've found, over the past 20
years, that there's been a consolidation of the distribution.
When the production and distribution providers congeal and
consolidate, then you limit the independent voices. And one of
the arguments made at the time was, ``Well, you know, there's
the Internet. Just because the same people own cable and
broadcast and satellite and--well, you can always go out and
get access and get your views published through the Internet.``
And now it's a case of some of the same companies with whom we
were bargaining during our negotiation that are looking now to
control that content distribution. And so, it is, it is very
much of a piece of media consolidation in this country and on
this planet that the Internet be protected as a free and open
means of expression.
Senator Dorgan. Mr. Chairman, a vote has now started, and I
will submit a series of questions to witnesses, and ask that
they respond in writing.
But, I do just want to say that the substantial increased
consolidation, and that's undeniable, there's just dramatic
consolidation; that's another subject that I've been involved
in. It does require, it seems to me, without tarnishing
everybody as bad actors--that's not the intent, it's not my
intent--it does require us, however, as a governing body to
thoughtfully regulate. Not to inhibit, not to try to stop
innovation, but to thoughtfully regulate on behalf of the
public interest. The public interest here is important.
So, I want us to progress. I want us to be a country that
has the best access in the world, the best content, and have
companies that provide us wonderful things as we want to access
Internet and cable and so on. But, I do think there's an
essential need here--and I think we've described it this
morning with the Chairman of the FCC, and the need to have some
certain regulatory capability. And I hope this hearing
demonstrates that.
I apologize that we have less time than we had hoped, but I
will submit questions in writing.
The Chairman. Senator Klobuchar?
STATEMENT OF HON. AMY KLOBUCHAR,
U.S. SENATOR FROM MINNESOTA
Senator Klobuchar. Thank you very much, Mr. Chairman. I am
up against the vote, so I'll try my best, here.
Professor Lessig, in your remarks, or your prepared
remarks, you talked about how, ''Unlike other industrialized
nations, we, in the United States, have failed to provide the
high level of competition among Internet service providers that
characterized early Internet growth.`` And could you talk a
little bit more about that and what other industrialized
nations are doing that we aren't doing? And how does your own
view of this relative lack of competition affect this debate?
Mr. Lessig. Sure. So, our competitors--Japan and Europe, in
particular--adopted essentially the regulatory strategy that we
adopted in 1996. But, in Japan, in particular, they made that
regulatory strategy actually work. So, it sustained enormous
competition among ISPs, providing increasing service at lower
cost for broadband access. And so, in Japan right now, there's
a significant opportunity to select among competitors if your
broadband service is no good or you don't like the blocking
that's existing on the broadband service. And that's a critical
part of what's made that market work so well.
The United States adopted a different strategy. We backed
away from the open access requirements that were originally
part of the vision for broadband provision on Title II, and
never imposed it under Title VI, and one predicted consequence
of that would be, we'd have exactly the consolidation that
we've had. And now, I think it's just not credible to assert
that there's real competition in access to broadband at the
fast levels that we're talking about.
In my city, San Francisco, not a backwater, even though I
come from South Dakota, not a backwater in provision; I have
one choice--exactly one choice--for fast broadband, and that's
cable. So, we have lost that competitive opportunity.
And just recognize how much more difficult that makes
Chairman Martin's job; because when you don't have competition
among ISPs, then, when there's a problem, the only choice the
consumer has is to come to the government and say to the----
Senator Klobuchar. Well----
Mr. Lessig.--government----
Senator Klobuchar.--how about this idea that I think Mr.
McSlarrow was referencing, and maybe in discussions I've had,
that wireless and satellite companies will enhance competition?
Do you think that that's true, that that will eventually
happen?
Mr. Lessig. I don't think that the satellite is going to
deal adequately with the latency problem, with the slowness
problem for certain applications. It might be that wireless, if
deployed correctly, will. But, still, we need to recognize,
it's a tiny fraction of 1 percent right now out there, and we
need to have real competition in the major markets right now in
order to get the kind of growth that is necessary.
Senator Klobuchar. And do you think that--I'd say this
does. I'm very interested in wireless providers, and have been
working on this Cell Phone Bill of Rights. Currently, the FCC
doesn't have a consistent policy that applies to the different
platforms when it comes to this. And if Congress is going to
maximize the value of Internet policies, do you think that
these policies should apply to both wired and wireless Internet
providers?
Mr. Lessig. I do. I think the open-access requirement
that's been suggested, in the context of wireless, would be
very good to encourage lots of competition here. Now, the
contexts are different. The platform in wireless was never the
neutral, open platform that the Internet was. So, in the
Internet context, we're talking about preserving something. In
the wireless context, we're talking about adding a kind of open
access--openness. But, I think it would be valuable to do it,
especially because Congress has not supported the idea of
expanding the amount of unlicensed wireless. The greatest
growth in applications in wireless has been, for example, in
the Wi-Fi space, unlicensed wireless spectrum. And by not
encouraging a wider growth in that, I think that we risk not
using the wireless technology in the most efficient way to spur
broadband growth.
Senator Klobuchar. I'm just--and, Dr. Hahn, maybe you're
going to comment on this, but you know, seeing my daughter, at
age 12, and her friends, legally downloading some of these
things and all these movies at once, and all these things--I do
understand why you could suddenly have this sudden rush on the
system. And one of things I wanted you--I know you're going to
answer what he said, but could you talk about--a little bit
about the fast lane and the slow lanes, and how fast the fast
lane is, compared to the slow lane? I always seem to be on the
slow lane. So, that's why I was wondering.
Dr. Hahn. So do I. Can I respond to Professor----
Senator Klobuchar. Yes.
Dr. Hahn.--Lessig and your question, first?
I'm currently working on this problem, related to openness
and wireless. And I suspect that several other economists are,
as well. And my own view is that it wouldn't be prudent to make
public policy decisions before we actually have a serious cost-
benefit analysis of this issue. And one hasn't been done yet.
But, I believe the economic impacts of a requirement to
have--of an openness requirement in the wireless space, which
is already an intensely competitive space, by any measure, is
likely to raise--likely to be to raise basic cellular rates.
So, I think you want to look at that really, really closely
before you do that, because that could have adverse income----
Senator Klobuchar. OK.
Dr. Hahn.--implications.
Senator Klobuchar. And the fast lane/slow lane?
Dr. Hahn. On your fast lane--give me your question----
Senator Klobuchar. How much faster is the fast lane? What's
the difference between them?
Dr. Hahn. Well, it depends. I mean, I know some people who
actually use dial-up modem, so there's a huge difference.
Senator Klobuchar. Yes.
Dr. Hahn. But, one point I'm--wanted to make with respect
to fast lane and slow lane--I realize discrimination is a
politically incorrect word, at least in this chamber, but from
an economist's point of view, they don't necessarily view it as
a bad thing. And, in fact, there is already discrimination out
there. If you were--if you were asked, ``Do you want a very
fast lane?'' from one of the Internet service providers, you'd
have to pay a few dollars more a month than if you want the
medium-fast lane. So, we do have some forms of discrimination
now, and it--we have forms of price discrimination all over the
place, and economists generally view it as a reasonable way of
paying for the fixed costs of investments and giving firms an
incentive to invest in future broadband networks.
Senator Klobuchar. Well----
Dr. Hahn. So, it has positive, as well as negative,
impacts.
Senator Klobuchar. Thank you.
I just have one last question. I'll, maybe, submit some
more, because we have this vote going on.
But, of you, Ms. Bateman--I'm a former prosecutor, so I'm
interested in sort of a different issue on the future of the
Internet, which is the ability of the creative community to
ensure that your content is protected and is not going to be
used in violation of copyright laws and otherwise stolen or
pirated or co-opted. And I know that you talked--I don't know
if you talked about it, I came in at the tail end of your
remarks, but in your prepared remarks, about the digital
watermarking could be the solution to prevent piracy. Do you
want to talk a little bit about that?
Ms. Bateman. I'm not as well versed on the technological
aspects of those, but I know there are--I mean, I think, from
the first day that the VCR machine was introduced, there were
concerns about, you know, taking the data off the initial
delivery system and sharing it with other people. So, I can't
answer that question, technologically, but I do know that there
are ways to countermand that, financially, by, you know, having
relationships with sponsors and so forth. And, in that sense,
you would want--actually want your stuff scraped and put on
other servers, so that that sponsor's ads or embedded--or
incorporated product is spread around.
I understand that there are some people who wouldn't want
that to happen. And it's an ongoing problem, and it's a problem
with CDs and, like I said, tapes and DVDs, and it's not just
the Internet.
Senator Klobuchar. Thank you very much.
The Chairman. Ms. Combs, Dr. Hahn, President Verrone, Ms.
Bateman, President McSlarrow, and Professor Lessig, on behalf
of the Committee, we thank you very much. Because of the
constraint of time, we will have to adjourn at this moment, but
I will be submitting questions to all of you. I hope you can
get a response to me.
The record will be kept open for 3 weeks. If you do have
any amendments you'd like to make to your statements, or
addendums, please feel free to do so.
[Whereupon, at 12:14 p.m., the hearing was adjourned.]
A P P E N D I X
Prepared Statement of Hon. Maria Cantwell, U.S. Senator from Washington
Thank you, Chairman Inouye and Vice Chairman Stevens for calling
this important hearing.
There are a number of critical issues when discussing the future of
the Internet; one is Internet governance. What should the role of
Internet Corporation for Assigned Names and Numbers (ICANN) be and what
should the role of the U.S. Government be within ICANN?
Another series of questions surround IPV6, the successor to the
current version of the Internet Protocol, for general use on the
Internet. Why is the new protocol's adoption so slow? And, taking a
step further back, how critical is its adoption in the first place to
the continued growth of the Internet?
And then there is Internet security, Internet safety, Internet
privacy, Internet pricing models, Internet advertising, more broadly,
Internet monetization, and the list goes on and on.
But the most fundamental issue regarding the future of the Internet
is how to ensure that consumers in all part of the country have a
choice of multiple, independently-owned providers for high-speed
Internet access.
For example, if there is a well-functioning market for residential
consumer broadband services, the discussion over net neutrality would
take on a different tone. In an efficient market, if a consumer doesn't
like the price or the terms of service, he or she can walk over to a
competitor. In today's market, by contrast, most consumers have one or
two independent choices for broadband. These broadband providers have a
huge amount of market power and consumers do not have much recourse.
Such limited choices limit the value of greater disclosure by
broadband providers regarding things such as its network management
practices. If a consumer believes the practices cited in the small
print are restrictive and unreasonable, they may get upset, but what
options do they really have in a market plagued by imperfect
competition?
And that leads me to net neutrality.
I appreciate the fact that a broadband provider will be limited in
the rate of return it can provide its shareholders if all it provides
consumers is the commodity transport of packets. I realize that these
providers now typically bundle broadband access with voice, video, and
data services riding over the broadband connection.
I also understand that there is a need for reasonable network
management to ensure quality of service to customers. Sometimes each
class of packets--voice, video, and data--needs to be treated
differently. And, sometimes the system architecture used by the
broadband provider places unique constraints on the system. But,
without transparency, who's to say what is reasonable?
So, where do you draw the line?
A few years back, the FCC issued its four net neutrality
principles. At the time they were released, it was clear that these
were principles and they were not enforceable. While the Commission
does have ancillary authority under Title I of the Communications Act,
it is a real stretch to claim that it can be applied to enforcing the
net neutrality principles. Given this reality, I was not surprised,
when a cable system operator recently criticized for using network
management practices contrary to the net neutrality principles,
replied, in effect, the emperor has no clothes.
This company's response only confirms the need of a fifth,
enforceable net neutrality principle of non-discrimination. It could be
as simple as the amendment offered by Senators Snowe and Dorgan during
the mark up of the Telecommunication Act of 2006.
With enforceable non-discrimination language, there will be a
greater level of trust by consumers and businesses that a broadband
provider's network management practices are just that--network
management.
No need to remind anyone here that the Internet has thrived, in
large part, because innovation has always been on the edge of the
network and did not have to be blessed by the network operator. We
should keep it that way.
If network operators, under the guise of network management, assert
a stronger role, you will see their business arrangements squeeze out
innovation by unaffiliated parties. The temptation may prove to be too
strong. And when Internet start-ups seek venture capital funding,
investors will be hard-pressed to consider any company not affiliated
with a network operator.
Of even greater concern is for the potential for broadband network
operators to leverage control over the transmission of packets through
their network and act as a gatekeeper for content. While I oppose the
illegal distribution of copyrighted material, this is just not the
right way of going about it. It raises a whole host of privacy concerns
and will no doubt lead to protracted litigation.
I look forward to hearing from the panel.
______
Response to Written Questions Submitted by Hon. Byron L. Dorgan to
Hon. Kevin J. Martin
Question 1. Recently, Comcast announced that it is engaging in
conversations with Bit Torrent, Inc. and Pando Networks, which
distribute content through Bit Torrent applications.
a. Does this demonstrate that the marketplace is addressing the
concerns raised by consumers?
b. Do you think that the response may have been influenced by the
political scrutiny?
c. Do deals cut with these individual companies solve the problem?
Answer. I am pleased that Comcast has reversed course and agreed
that it is not a reasonable network management practice to arbitrarily
block certain applications on its network. I also commend the company
for admitting publicly that it was engaging in the practice and now
engaging in a dialog with BitTorrent. Unfortunately, Comcast originally
disavowed any knowledge of any action to block certain applications on
its network and only came forward after repeated requests and
heightened public scrutiny.
I hope that the negotiations will result in a solution that
preserves consumers' ability to access any lawful Internet content and
applications of their choice. That ability is fundamental to preserving
the open marketplace and innovation that characterizes the Internet.
I am concerned, though, that Comcast has not made clear when they
will stop this discriminatory practice. It appears this practice will
continue throughout the country until the end of the year and in some
markets, even longer. While it may take time to implement its preferred
new traffic management technique, it is not at all obvious why Comcast
couldn't stop its current practice of arbitrarily blocking its
broadband customers from using certain applications. Comcast should
provide its broadband customers as well as the Commission with a
commitment of a date certain by when it will stop this practice. Unless
and until it does so, it is ignoring the concerns raised by consumers.
I believe that the Commission must remain vigilant in protecting
consumers' access to content on the internet. Thus, it is critically
important that the Commission take seriously and respond to complaints
that are filed about arbitrary limits on broadband access and potential
violations of our principles.
Question 2. In the last Congress, when this Committee was
considering network neutrality legislation in the telecom legislation,
the phone and cable companies argued that Congress did not need to
enact rules of the road to protect consumers from discrimination. They
stated that they would never censor political speech or block lawful
applications and content. They said that consumers' concerns about such
bad behavior was unfounded and was a ``solution in search of a
problem.'' We now have seen some high profile examples of network
operators censoring speech and blocking applications. Are the concerns
that were raised last year still a ``solution in search of a problem?''
Answer. As the expert communications agency, it was appropriate for
the Commission to adopt, and it is the Commission's role to enforce,
its Internet Policy Statement. Indeed, on several occasions, the entire
Commission has reiterated that it has the authority and will enforce
these current principles.
In 2007, the Commission committed to enforcing our existing
principles and the policy statement. Specifically, in April 2007, the
Commission expressly stated:
The Commission, under Title I of the Communications Act, has
the ability to adopt and enforce the net neutrality principles
it announced in the Internet Policy Statement. The Supreme
Court reaffirmed that the Commission ``has jurisdiction to
impose additional regulatory obligations under its Title I
ancillary jurisdiction to regulate interstate and foreign
communications.'' Indeed, the Supreme Court specifically
recognized the Commission's ancillary jurisdiction to impose
regulatory obligations on broadband Internet access
providers.\1\
---------------------------------------------------------------------------
\1\ Broadband Industry Practices, WC Docket No. 07-52, Notice of
Inquiry, 22 FCC Rcd 7894, 7896, para. 4 (2007) (internal footnotes
omitted).
I believe that the Commission has a responsibility to enforce the
principles that it has already adopted. Indeed, the Commission has
already taken enforcement action in response to other complaints. In
the Madison River complaint, the Commission ordered a telephone company
to stop blocking VoIP calls.
Unfortunately, as you point out, there have been several incidents
or problems in which carriers have been accused of blocking
applications. I believe that the Commission must remain vigilant in
protecting consumers' access to content on the internet. Thus, it is
critically important that the Commission take seriously and respond to
these complaints that are filed about arbitrary limits on broadband
access and potential violations of our principles.
______
Response to Written Questions Submitted by Hon. Ted Stevens to
Hon. Kevin J. Martin
Question 1. Is the FCC aware of any instances where an operator has
discriminated against content on a religious or political point of
view?
Answer. In September 2007, the press reported that Verizon Wireless
rejected a request from NARAL Pro-Choice America to make Verizon's
mobile network available for a text-message program that allowed people
to sign up for text messages from NARAL. The activities attributed to
Verizon Wireless, however, involved wireless text messages rather than
access to Internet content. The Commission has sought public comment on
a Petition for Declaratory Ruling filed by several public interest
groups to clarify the regulatory status of text messaging services,
including short-code based services sent from and received by mobile
phones.
In addition, it has been reported in the press that AT&T muted
remarks made by singer Eddie Vedder of the rock group Pearl Jam
criticizing President Bush during a live Webcast of a Pearl Jam
performance.
Question 2. Given the size, complexity and cost of the broadband
networks, how quickly can a network operator reasonably be expected to
migrate to new management technologies? At what cost?
Answer. The Commission has the dual responsibilities of creating an
environment that promotes infrastructure investment and broadband
deployment and to ensure that consumers' access to content on the
Internet is protected. In order to meet these responsibilities, I
intend to explore more fully what constitutes reasonable network
management practices, including the important ability for network
managers to block the distribution of illegal content, including
pirated movies and music and child pornography. I note, however, that
the Commission has not mandated the adoption of any particular network
management technology.
Question 3. What are the unique challenges that are faced by
smaller rural providers who may have more stringent capacity issues--is
this an area where one size fits all?
Answer. The Commission has not mandated the adoption of any
particular network management technology and we would need to consider
all of the facts including the capacity issues and unique challenges of
rural carriers. Rather, I intend to explore more fully what constitutes
reasonable network management practices, including the important
ability for network managers to block the distribution of illegal
content, including pirated movies and music and child pornography.
______
Response to Written Questions Submitted by Hon. Olympia J. Snowe to
Hon. Kevin J. Martin
Question 1. The FCC has held two hearings, one at Harvard and one
at Stanford, to hear from expert panelists regarding broadband network
management practices. At Harvard, you mentioned that service providers
should be allowed to take reasonable steps to make efficient use of
their networks but that such management policies must be disclosed.
Many witnesses at that hearing also voiced concern about the lack of
disclosure and transparency. Since the Comcast-BitTorrent incident,
Comcast has revised its terms of service and issued a new acceptable
use policy. Does this change in Comcast's TOS provide enough
information to consumers or developers that may want to create new
applications or services to work over the Comcast network?
Answer. First, the Commission still has the Comcast complaint in
front of it. I was pleased that Comcast has reversed course and agreed
that it is not a reasonable network management practice to arbitrarily
block certain applications on its network. I also commended the company
for admitting publicly that it was engaging in the practice and for
engaging in a dialog with BitTorrent. I am concerned, though, that
Comcast has not made clear when they will stop this discriminatory
practice. It appears this practice will continue throughout the country
until the end of the year and in some markets, even longer.
I have proposed a framework for analyzing complaints and concerns
about network management practices by broadband operators. First, the
Commission should consider whether the network management practices are
intended to distinguish between legal and illegal activity. The
Commission's network principles only recognize and protect users'
access to legal content. Second, the Commission should consider whether
the network service provider adequately disclosed its network
management practices. A hallmark of whether something is reasonable is
whether an operator is willing to disclose fully and exactly what they
are doing. Adequate disclosure of the particular traffic management
tools and techniques--not only to consumers but also to the designers
of various applications and entrepreneurs--is critical. Finally, the
Commission should consider whether the network management technique
arbitrarily blocks or degrades a particular application.
If a network management practice selectively identifies particular
applications or content for differential treatment, the Commission
should evaluate the practice with heightened scrutiny, with the network
operator bearing the burden of demonstrating that the particular
practice furthered an important interest, and that it was narrowly
tailored to service that interest.
Question 1a. Can the company provide more disclosure and not
infringe upon proprietary or sensitive company information that would
be useful to consumers and developers?
Answer. While we have not yet acted on the Comcast complaint,
adequate disclosure of the particular traffic management tools and
techniques must be provided to the designers of various applications
and entrepreneurs.
Question 2. The Commission is still investigating complaints
regarding the Comcast-BitTorrent blocking or degrading incident and has
yet to determine whether the actions violated the FCC's principles
protecting consumer access to the Internet. However, you stated with
respect to the incident it does not appear that cable modem subscribers
had the ability to do anything they wanted on the Internet, it wasn't
content agnostic, and the questionable network management technique was
being triggered regardless of the actual levels of congestion at that
particular time. Given this evidence and the testimony of the various
witnesses at your two hearings, it seems as if the activities of
Comcast were in clear violation of at least two of the FCC's
principles--``Consumers are entitled to access the lawful Internet
content of their choice'' and ``are entitled to run applications and
use services of their choice,'' does the Commission agree?
Answer. The Commission is still investigating these complaints and
we have not yet determined whether the actions violated our principles
protecting consumer access to the Internet. However, Comcast appears to
have utilized Internet equipment from Sandvine or something similar
that is widely known to be a relatively inexpensive, blunt means to
reduce peer-to-peer traffic by blocking certain traffic completely. In
contrast, more modern equipment can be finely tuned to slow traffic to
certain speeds based on various levels of congestion. Specifically,
this equipment: (1) blocks certain attempts by subscribers to upload
information using particular legal peer-to-peer applications by
pretending to be the subscriber's computer and falsifying a ``reset''
packet to end the communication, and (2) degrades the corresponding
attempts to download information using the same peer-to-peer
applications.
Based on the testimony we have received thus far, I think it is
important to clarify a few points. Contrary to some claims, it does not
appear that cable modem subscribers had the ability to do anything they
wanted on the Internet. Specifically, based on the testimony we have
received thus far, some users were not able to upload anything they
wanted and were unable to fully use certain file sharing software from
peer-to-peer networks. Contrary to some claims, it does not appear that
this technique was used only to occasionally delay traffic at
particular nodes suffering from network congestion at that time.
Indeed, based on the testimony we have received thus far, this
equipment is typically deployed over a wider geographic or system area
and would therefore have impacted numerous nodes within a system
simultaneously. Moreover, the equipment apparently used does not appear
to have the ability to know when an individual cable segment is
congested. It appears that this equipment blocks the uploads of at
least a large portion of subscribers in that part of the network,
regardless of the actual levels of congestion at that particular time.
Finally, contrary to some claims, it is not clear when they will
actually stop using their current approach. They claim that they will
deploy this new solution by the end of the year but it is unclear
whether they will be finished deploying their solution or just starting
that migration. Indeed the question is not when they will begin using a
new approach but if and when they are committing to stop using the old
one.
Question 3. It seems unclear when Comcast will actually stop using
their questionable approach to network management. The broadband
provider has vaguely claimed they will deploy a new network management
solution by the end of the year but it seems as if they are continuing
to use their current method. What is the Commission's time-frame with
concluding its investigation?
Answer. I am hopeful that the Commission will conclude its
investigation into the Comcast complaint by this summer.
Question 4. Isn't it concerning that Comcast is continuing to
employ discriminatory network management practices, which many experts
have called unreasonable?
Answer. I am concerned that Comcast has not made clear when they
will stop this discriminatory practice. It appears this practice will
continue throughout the country until the end of the year and in some
markets, even longer. While it may take time to implement its preferred
new traffic management technique, it is not at all obvious why Comcast
couldn't stop its current practice of arbitrarily blocking its
broadband customers from using certain applications. Comcast should
provide its broadband customers as well as the Commission with a
commitment of a date certain by when it will stop this practice.
______
Response to Written Questions Submitted by Hon. Daniel K. Inouye to
Dr. Robert Hahn
Question 1. Since 2003, the FCC has been reclassifying broadband
services as Title I services under the Communications Act. In 2005, the
Supreme Court upheld this approach in its Brand X decision. In light of
the FCC's reclassification of broadband services and the Supreme Court
subsequently deciding that this approach passes legal muster, do you
believe the FCC has adequate authority to stop broadband network
providers from engaging in unfair discrimination?
Answer. Let me preface my remarks by saying that I am an economist
and not a lawyer. I do believe that the FCC has adequate authority. I
also believe that, to the extent there are antitrust issues, the FTC
and DOJ can play constructive roles.
Question 2. Broadband capacity plays an important role in the
network neutrality and network management discussion. To this end, I
would like to ask two questions: Can we worry less about discrimination
or content favoritism if there is more broadband network capacity?
Answer. This question avoids the most critical question in the
broadband debate--namely, what is the most efficient way in which
network owners can expand capacity. A ``dumb'' large pipe that treats
all packets the same may cost significantly more than an intelligent
smaller pipe that prioritizes some traffic over others. The higher
costs associated with the dumb pipe will likely be passed on to
broadband subscribers in the form of higher monthly subscription fees.
Regulators should not mandate this outcome because it would likely be
inefficient and hurt consumers.
Question 2a. Can broadband network providers add capacity fast
enough to meet consumer demand?
Answer. In the absence of a market failure, regulators should not
concern themselves with such issues. The market can be counted on to
satisfy demand. Some of the legislative proposals limiting pricing
freedom are likely to slow the introduction of innovative technologies
that can best meet consumer demands.
______
Response to Written Questions Submitted by Hon. Ted Stevens to
Dr. Robert Hahn
Question 1. Who benefits from network neutrality regulation?
Answer. This depends on the kind of network neutrality regulation.
If we assume net neutrality regulation prevents a platform provider
from charging a content provider a positive price for enhanced quality
of service, then my sense is that there would be three important
economic impacts: (1) Higher bills for end users (i.e., consumers and
businesses that use the Internet will likely pay more than they would
otherwise because the platform provider cannot recover costs of the
network from the content providers); (2) Fewer applications that depend
on enhanced quality of service would come to market; and (3) Some
content providers would benefit who do not need a higher quality of
service because they would not be charged by the platform for providing
end users with access to their content.
Regarding item (1), more research needs to be done to estimate the
economic impacts on consumers, but preliminary research I have done
with Hal Singer suggests that the adverse price impacts on end users
could be substantial.
Regarding item (2), consumers who desire applications that require
a higher quality of service to perform effectively will be less likely
to have that opportunity with net neutrality regulation. Examples
include online gaming and telemedicine. There would be social losses
and losses to consumers from a reduction in investments aimed at
improving quality of service.
Question 2. Net neutrality proponents argue one set of rules for
everyone, but doesn't network neutrality impact different consumers
differently and different networks differently?
Answer. The impact of particular regulations is an empirical
question. Nonetheless, I think it is fair to say that different
consumers will be impacted differently as will different networks. I
would need to have more precise economic data to say more about this.
______
Response to Written Questions Submitted by Hon. Olympia J. Snowe to
Dr. Robert Hahn
Question 1. It has been stated numerous times that there isn't
sufficient broadband ISP competition. While some markets (more
metropolitan and urban areas) do have robust competition, most markets
have an effective duopoly that controls access to high speed Internet
connections. How would you assess the current direction of broadband
competition given the emergence of wireless broadband and broadband
over power lines (BPL) services? Is competition growing?
Answer. This depends on how you define competition. Data I cited in
my testimony, contained in the FCC reports, suggest that competition in
the wireline broadband space is growing. Moreover, competition between
wireline and wireless networks is growing. So, for example, I may use a
BlackBerry to get my e-mail or access the Internet, and I might also
use my mobile phone. My view of the general ``broadband market'' is
that it is highly dynamic and consumers are benefiting. I cite price
and quality of service data in my testimony that makes this point.
Question 2. Why isn't there more competition in the Broadband
space? What barriers to entry are hindering new entrants?
Answer. I see a lot of competition in the broadband space. In my
testimony and in AEI-Brookings publications, I make suggestions on
lowering some barriers to entry. One area that could lead to greater
competition in broadband is the auctioning off of more spectrum to the
private sector.
Question 3. What specific recommendations do you have for us to
craft effective policy that would promote more competition in this
market space?
Answer. Let's recognize that regulation that aims to prevent a
platform owner from contracting with a website for enhanced quality of
service at a positive price will not likely generate more competition
among platform owners. Let's also recognize that regulation has costs
as well as benefits. Moreover, most economists who have looked at
proposals for net neutrality appear to agree that the benefits of such
regulation are likely to fall short of the costs.
______
Response to Written Questions Submitted by Hon. Byron L. Dorgan to
Patric Verrone
Question 1. Are network operators a potential threat to new video
services on the Internet?
Answer. Network operators are indeed a potential threat to the
proliferation of new video services on the Internet. The WGAW believes
that the public interest is served by the existence of diverse new
media platforms that offer original made-for-online content. Many such
sites have been launched and many more are in the works. We must,
however, ensure that these new ventures are not placed at a
disadvantage by network operators that discriminate or in any way
impede the ability of consumers to access their content. Certain
network operators have already admitted blocking or otherwise
interfering with certain types of web traffic. The WGAW believes the
actions of some network operators have set a dangerous precedent and
must be immediately counteracted.
Question 2. Should network operators who are also in the business
of selling content to their subscribers have the power to discriminate
against competing services?
Answer. Absolutely not. This type of interference is a threat to
the vitality of the Internet.
The concern of the WGAW and its members is that the service
providers will use their resources to create a ``walled garden'' on the
Internet, effectively blocking access to sites that can not afford to
pay for distribution, or allowing favored content providers access to a
``fast lane.'' The Internet is the next frontier in the distribution of
news and entertainment content. If we want to avoid the problems that
have resulted from the extreme consolidation of the Nation's broadcast
system, we must allow the Internet to remain true to the principles of
openness that animated its creation. We must ensure that independent
production and a diversity of viewpoints are not crowded out of the
Internet. SB 215 will do just that.
We are also concerned that a lack of competition among Internet
service providers could ultimately leave Americans with fewer choices
than what is now available on broadcast and cable television. One can
imagine a circumstance in which high speed Internet service to a
community is offered by only one company. Should that company also be a
content producer, or be affiliated with or have an exclusive
arrangement with a content producer, the access of consumers to diverse
viewpoints could be threatened. We share the Senator's belief that
democracy relies on diverse viewpoints. Maintaining the Internet as an
open forum will ensure that Americans have access to an inexhaustible
source of information and entertainment.
Question 3. Are we in danger of seeing the old media cartel
reappear in new media?
Answer. It is not difficult to envision how ``old media''
conglomerates could use their economic power to carve out significant
market share on the Internet, to the detriment of independent producers
and small start-ups. The major media companies are actively pursuing
online business. Hulu.com and iTunes are two of the most prominent
examples of the major studios attempting to capture online market
share.
There is a lesson to be learned from the old media consolidation.
As I mentioned in my remarks, the companies that control distribution,
and now production, have used their market power to own and control the
content writers create. If we do not protect the openness of the
Internet, we will merely recreate that increasingly closed system, in
which distributors use their ability to turn the spigot off and on as a
means of controlling content. The dominant players in the new media
cartel may be the same conglomerates that control traditional media, or
they may be Internet service providers that use their distribution
prowess to establish the same hierarchical business model. In either
case, such consolidation will be detrimental to small producers,
content creators and the American public, which is best served by
fostering access to a diversity of views.
______
Response to Written Questions Submitted by Hon. Jim DeMint to
Patric Verrone
Question 1. In your testimony, you argue that the Internet will be
``turned into a walled garden of content control'' without net
neutrality. Of course, currently, there are no net neutrality
regulations. In fact, there has been no such regulation on the entire
broadband industry for years. Further, cable modem services have never
been under such regulations. Have you seen a decrease in the quality,
quantity. consumption. or availability of content created by your
organizations members online currently compared to 1 year ago? Five
years ago? Ten years ago?
Answer. Over the past few months we have experienced an exponential
growth in the quality, quantity, consumption and availability of online
content. Content made for traditional media is being reused on the
Internet, and new sites have proliferated online with original made-
for-Internet material. The members of the Writers Guild are poised to
take advantage of these new platforms as a means of distributing the
next generation of audiovisual content. But as I said in my testimony,
in order for writers to create content and compete, we must maintain
open access to the Internet.
The growth and impact of online content were illustrated during our
recent strike against the major media companies. During the work
stoppage, dozens of writers began producing Internet content. These
works took many forms: historical analyses, strike updates, parody.
Some clips posted by WGAW members received as many as 500,000 online
hits.
Writers' interest in producing and distributing original content on
the Internet will not subside now that the strike has ended. The Guild
is actively negotiating collective bargaining agreements with
independent companies that plan to concentrate on new media production.
The WGAW supports net neutrality as a means of protecting the
environment that has allowed this new market to emerge. Your question
presupposes that `net neutrality' is government regulation. We have a
different view. SB 215 is not government regulation, but a prophylactic
measure to preserve an open access and prevent the regulation of the
Internet by private companies that have the technical capability to
control distribution channels.
Question 2. How do the revenues received by your members from the
Internet distribution of their works compare to 1 year ago? Five years
ago? Ten years ago?
Answer. While we have seen significant growth in revenues received
by members from Internet distribution. the exact results have been
difficult to ascertain. Prior to our recent negotiations with the
studios, the compensation due for material reused on the Internet was
in dispute. With the ratification of our new agreement, there is now a
negotiated compensation structure for reuse of material on the
Internet. Just as important, we succeeded in negotiating broad access
rights allowing us to monitor the volume of Internet distribution as
the market develops.
Question 3. Can you share any example of fellow writers' work being
blocked by an Internet provider?
Answer. While we do not have an example of a fellow writer's work
being blocked, the WGAW is extremely concerned about the dangerous
precedent being set by certain Internet service providers. Comcast,
AOL, AT&T and others have all been accused of, and in some cases have
admitted, network management practices that interfered with consumer
access to legal content. The WGAW has learned from its past experience
with media consolidation that we must be diligent in our efforts to
ensure that these providers are not allowed to restrict the ability of
Americans to access content.
______
Response to Written Questions Submitted by Hon. Byron L. Dorgan to
Justine Bateman
Question 1. Are network operators a potential threat to new video
services on the Internet?
Answer. Internet connection providers are of course a vital part of
the Internet experience and an absolute necessity in connecting to it.
There is certainly the impression given by these companies that they
would very much like to be in the primary business of constraining that
Internet experience. There simply cannot be the continuation of
innovation we have witnessed so far on-line with the private interest
constraints that have been suggested by these Internet providers. The
``constraint business'' these providers suggest are absolutely threats
to new video services. Supply and demand need to be the deciding
factors in a new Internet venture's success or failure just like in the
brick-and-mortar business landscape. In addition, the blocking and
impeding of web traffic that has been perpetrated by specific Internet
providers establishes a dangerous precedent and clearly demonstrates
the need for the Federal Government to require preserving the Internet
as the free and open marketplace it is today.
Question 2. Should network operators who are also in the business
of selling content to their subscribers have the power to discriminate
against competing services?
Answer. No. If Time/Warner, for example, wants to be in the
Internet provider business (as they are) they need to abide by those
rules (that will hopefully encompass Net Neutrality). If they also want
to be in the content provider business (as they are), they are welcome
to be and to then abide by those rules--you have to be good enough and
interesting enough for people to tune in and to continue to tune in. I
do not believe that wearing two hats means you suddenly disregard any
rules of those hats; it means you now have two sets of rules.
By the way, is this practice currently allowed with regard to the
Cable TV services they provide? Are they allowed to block or impede
access to programming just because it's not a Time-Warner show or on a
Time-Warner network?
Conversely, if each Internet customer had two or more Internet
providers to choose from, then perhaps there would be providers
supplying only their material, but the most successful provider with
the most customers would always be the one offering all the Internet
has to offer.
Question 3. Are we in danger of seeing the old media cartel
reappear in new media?
Answer. I absolutely believe that the media corporations are
spitting mad that they do not have control over the distribution on the
Internet and that their current and suggested future practices only
hint at the control they wish they could exert over it.
For the entire life of TV and film production until recently, the
studios and networks have had almost absolute control over
distribution. That held not only the content providers attention, but
also that of the advertisers.
But at the same time, al! the media consolidation of the last 15
years has taken the studios and networks out of the decision positions
for the most part and put corporate businessmen, far removed from any
knowledge about entertainment production, in the decision seats
instead. As a result, quality and content have been pillaged in
exchange for cold, hackneyed, overused concepts in our TV shows and
films. The entire focus of these newly formed Media Collections is to
dominate the market and increase financial performance. This in itself
is not an unproven business tactic, but it doesn't work in the
entertainment business.
So to answer your question, yes, I believe that the media
corporations, in an effort to stem this mud-slide of failure they find
themselves in, want to position themselves on the Internet in the same
dominant way as they've enjoyed off-line. The fact of the matter is
that this is not how you regain success in entertainment. The way you
regain success in entertainment is to create compelling programming
that people want to see over and over again.
So, even if they got their wish and ``took over the Internet",
nobody would watch, just like they're not watching TV and films like
they used to. And we would all be looking for a new way to share our
ideas with one another. Once that was established, they would then try
to dominate that and so on and so on.
______
Response to Written Question Submitted by Hon. Jim DeMint to
Justine Bateman
Question. Under a net neutrality regulatory regime, no online data
(including video) could be prioritized. What impact would such a regime
have on the success of your project, FM78.TV, if you could not
guarantee that its content reach end consumers with the quality you and
they desire?
Answer. The lack of prioritization for data, including video, is
exactly what FM78.TV and other online media ventures will rely on in
order to be competitive in the new online marketplace. Our biggest
worry is that the current set of content producers, mainly the major
media companies, will use their largesse to secure a preferred place on
the Internet. Should they be able to do that, companies such as mine,
which lack the resources to pay for preferential service or
prioritization, will be unable to compete with the extraordinary
resources of the major media companies. If there is a `fast lane' on
the internet, I worry that only those companies with the financial
capacity will be able to spread their content to the public.
The Internet service providers have already expressed their desire
to maximize revenues be creating systems where they can provide
preferential services to certain content companies in exchange for fees
or compensation. Such a scheme could literally mean that a company such
as mine is unable to compete. FM78.TV would prefer to maintain the open
marketplace the current Internet structure provides. This will allow
small business to compete with the large corporations that want to make
the Internet the latest iteration of broadcast television--where
control over distribution is used to own and control content.
If your question is intended to highlight the lack of broadband
capacity in the United States, then I share your concern. I too am
worried that companies like mine can not flourish until more Americans
have access to high-speed, high-quality Internet service. The fact that
we have allowed private companies to build out the current broadband
network is extremely regrettable and I believe will be a problem for
generations to come. Unlike the airwaves that have been deemed public
and have been monitored by the Federal Government, we have allowed the
next generation of information to be solely controlled by the companies
that have laid the groundwork, with nearly no oversight and with no
governance. In such a scenario, the least we can do is insure that the
companies that control the pipes are not able to interfere with the
legal content and information that American's are able to access.
I hope the Federal Government, along with state and local
governments, will use every means at their disposal to facilitate the
build of the country's broadband infrastructure. Several independent
sources have expressed concern that the United States is quickly
falling behind other developed countries in terms of access to high
speed Internet service. The competitiveness of our economic future
depends upon more Americans having greater access to high speed
internet. As a nation, we must prioritize greater commitment to
insuring that American continues to lead in the new economy, and
insuring that every American has access to high speed Internet is
critical to that endeavor.'
1 find it troubling that certain telecommunications companies are
claiming that net neutrality will stifle the infrastructure
development. The same companies that make such a specious argument are
the same companies that continue to generate record profits.
Additionally, net neutrality simply preserves the ability for companies
such as mine to distribute content on the net--it does nothing to
interfere with the companies ability to charge consumers for the
services.
I sincerely hope governments will prioritize the rapid development
of the broadband infrastructure just as I sincerely hope that the
founding principle of the internet--an open marketplace--will be
preserved for generations to come.
______
Response to Written Questions Submitted by Hon. Daniel K. Inouye to
Kyle McSlarrow
Question 1. Since 2003, the FCC has been reclassifying broadband
services as Title I services under the Communications Act. In 2005, the
Supreme Court upheld this approach in its Brand X decision. In light of
the FCC's reclassification of broadband services and the Supreme Court
subsequently deciding that this approach passes legal muster, do you
believe the FCC has adequate authority to stop broadband network
providers from engaging in unfair discrimination?
Answer. Whether or not the FCC has the legal authority to regulate
network management practices and otherwise enforce ``net neutrality''
requirements is currently an open question that is being considered by
the FCC in an ongoing proceeding. I would also note that the FCC is not
the only agency that may have authority to address these issues. In
particular, the FTC has claimed authority to address anticompetitive
practices by network operators.
Question 2. Broadband capacity plays an important role in the
network neutrality and network management discussion. To this end, I
would like to ask two questions:
Can we worry less about discrimination or content favoritism if
there is more broadband network capacity?
Answer. Broadband consumers expect reliable and high-quality
service at a reasonable cost that enables them to access lawful content
over the Internet--and that is what cable broadband service provides.
Cable broadband subscribers are able to enjoy the full benefits of
broadband because cable operators manage their smart networks on a
content-agnostic basis to provide seamless connectivity, deter spam and
viruses, and make sure that a tiny minority of users who utilize
bandwidth-heavy applications don't slow down the Internet for everyone
else.
While cable broadband providers are constantly upgrading their
capacity, the addition of capacity does not obviate the need for
reasonable network management practices. For instance, as I explained
in my testimony, many P2P protocols are written specifically to
commandeer as much bandwidth as is available, meaning that providers
cannot build their way out of the problems caused by these high-
bandwidth applications. The best way to ensure that customers have the
capability to access applications at desired speeds is to continue to
allow broadband providers to manage their networks so as to ensure the
best results for their customers.
Question 2a. Can broadband network providers add capacity fast
enough to meet consumer demand?
Answer. Cable broadband providers are constantly upgrading their
broadband networks to satisfy customer demand for fast and efficient
access to new content and new applications, and to win and retain
customers in the face of increased competition from many alternative
providers. As I noted above, however, the addition of capacity does not
eliminate the need for providers to manage their networks to ensure the
best possible broadband experience for their customers.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
Kyle McSlarrow
Question 1. In your written testimony you raised concerns that any
net neutrality rules may slow broadband roll out and adoption. Yet, you
also cite the fact that cable already passes by 92 percent of
households. Are you saying, in effect, that net neutrality rules will
further slow consumer adoption of broadband? I thought it is content,
applications, and price that drive consumer adoption of broadband.
Answer. We are very proud of the fact that cable providers have
deployed broadband to more than 92 percent of households in the United
States using private risk capital. However, cable broadband providers
are constantly upgrading their networks to meet consumer demand and to
ensure a stable and reliable broadband platform for providers of online
content and applications that increasingly need greater transmission
capacity and higher speeds. Regulations that would dictate or rule out
particular business models or impede a broadband provider's ability to
manage its broadband network could deter investments in these upgrades,
to the detriment of consumers and service providers alike.
Question 2. Do you believe there to be a competitive market for
high-speed Internet access in our country? If so, how many providers do
there need to be in a market for you to consider that market to be
competitive?
Answer. The market for high-speed Internet access is very
competitive. Cable operators, telephone companies, satellite providers,
wireless network operators, mobile service providers and others are
investing and competing with each other to offer the most compelling
and innovative service.
Question 3. Does your organization believe that the FCC's four net
neutrality principles are enforceable by the agency? If not, then why
not?
Answer. The FCC's four net neutrality principles are not binding
and enforceable today, because they were not adopted as rules. Whether
or not the FCC has the legal authority to adopt such rules or to
regulate network management practices is currently an open question,
and is being considered by the FCC in an ongoing proceeding.
Question 4. Does your organization believe that the FCC can use its
ancillary authority under Title I of the Communications Act to enforce
its four net neutrality principles? If not, then why not?
Answer. Whether the FCC has ancillary authority to enforce its net
neutrality principles is being considered in the proceeding mentioned
above.
Question 5. As you know, in a footnote to the FCC's four net
neutrality principles, there was an escape clause which provides
network operators a pass if they can show if they are performing
``reasonable network management practices.'' What does NCTA consider to
be ``reasonable network management practices?'' Does the FCC need to
define the term further?
Answer. Cable customers enjoy the full benefits of broadband
because cable operators manage their smart networks on a content-
agnostic basis to provide seamless connectivity, deter spam and
viruses, and make sure that a tiny minority of users do not slow down
the Internet for everyone else. In order to ensure a stable and
reliable broadband platform, cable operators must have the continued
flexibility to adopt and implement content-agnostic network management
practices that are reasonable with respect to their particular
networks. ``Reasonable network management'' practices also depend on
the types of issues that a particular network is facing. Any government
definition of reasonable network management practices would invite
confusion and litigation and would serve only to inhibit providers from
effectively addressing future network issues. Regulations or a
government definition of acceptable network management practices could
also inhibit the development of innovative approaches to thwarting
piracy and enhancing the online experience for the vast majority of
Internet users.
Question 6. My understanding is that one of the ideas the FCC is
considering is for broadband providers to disclose their network
management policies in its terms of service. I am not sure what that
will accomplish because the idea will only work if there is a
competitive market for high-speed Internet access, where consumers can
switch providers if they do not like the terms of service. Does NCTA
support greater consumer disclosure of network management practices in
plain English and in readable size font? If a network management
practice is disclosed to consumers, such as blocking or delaying
packets, does it make it OK for a network operators to do it?
Answer. As I have frequently stated, the cable industry is always
looking at ways to improve upon its disclosure of information to
consumers in order for such disclosure to be as clear and helpful as
possible. Cable operators believe that keeping their subscribers
informed about network management practices is a critical element of
customer service, but best left to individual company's policies,
rather than government rules. NCTA member companies use a variety of
methods to manage their networks and are therefore best suited to
determine how to appropriately disclose that information. Cable
companies periodically review and revise their disclosure statements to
ensure that they are complete and easily understandable, and they do so
without any government mandate. Given the intense competition for
broadband customers that cable faces from telephone companies and other
providers, cable operators strive to ensure that their terms of service
are fair and reasonable.
Question 7. Bit Torrent uses peer-to-peer file sharing technology
to deliver video content online. My understanding is that the
technology is an efficient way to deliver content. Won't the cable
industry's transition to DOCSIS 3 point 0 and Switched Digital Video
ease some of the bandwidth constraints?
Answer. The transition to DOCSIS 3.0 and switched video technology
will enhance the efficiency of broadband networks, but it will not
eliminate the need for sound network management practices. Network
operators will still need to address and eliminate viruses and spam,
and they will still need to ensure that tiny minority of heavy users
does not degrade service for the vast majority of customers. Further,
as I explained in my testimony, many P2P protocols are written
specifically to commandeer as much bandwidth as is available, meaning
that added capacity can't eliminate problems caused by these high-
bandwidth applications. The best way to ensure that customers have the
capability to access applications at desired speeds is to continue to
allow broadband providers to manage their networks so as to ensure the
best results for their customers.
Question 8. Some public interest groups argue that the reason a
cable system operator might want to degrade the lawful peer-to-peer
video delivered online is for competitive reasons. How do you respond?
Answer. Those charges are wholly without foundation. In just the
last few years, the use of Internet video on demand has grown at a
dramatic rate. In July 2006, 107 million Americans watched video online
and about 60 percent of Internet users downloaded more than 7 billion
videos off the Internet. In February 2008, nearly 135 million U.S.
Internet users spent an average of 204 minutes viewing 10.1 billion
online videos. YouTube represented 34 percent of those online videos,
or nearly 3.5 billion in total. To put it into context, in 2006,
YouTube consumed as much bandwidth as the entire Internet consumed in
the year 2000.
Competition has driven cable operators to invest in faster and more
reliable networks to meet consumer demand for video and other
bandwidth-intensive applications. Cable's investment in and deployment
of the reliable high-speed broadband service that provides the
ecosystem in which Google, YouTube, Yahoo! and other Internet services
can flourish.
______
Response to Written Questions Submitted by Hon. Ted Stevens to
Kyle McSlarrow
Question 1. What do consumers expect a network operator to provide
for them in terms of service and network management?
Answer. Broadband consumers expect reliable and high-quality
service at a reasonable cost that enables them to access lawful content
over the Internet. Cable operators have demonstrated their commitment
to providing Americans the very best broadband service available, and
remain committed to doing so. Cable broadband subscribers enjoy the
full benefits of broadband because cable operators manage their smart
networks on a content-agnostic basis to provide seamless connectivity,
deter spam and viruses, and make sure that a tiny minority of users who
utilize bandwidth-heavy applications don't slow down the Internet for
everyone else.
Question 2. If a particular bandwidth service or application uses
more bandwidth than others, why shouldn't the business owner of that
application or service have to pay a fee?
Answer. It may very well be appropriate for a provider of such a
service to bear a portion of the costs of delivering the service to its
users. The alternative would be for the network provider to pass those
costs on to all subscribers, including those who do not user the
service. This could put unnecessary upward pressure on the rates for
broadband service and impede broadband adoption. Network and service
providers need the flexibility to design and implement business plans
that allow them to innovate and respond to consumer demand.
______
Response to Written Questions Submitted by Hon. Olympia J. Snowe to
Kyle McSlarrow
Question 1. In a news.com August 2007 article, a Comcast spokesman
``flat-out denied'' Comcast was filtering or ``shaping'' any traffic on
its network. He went on to state the company doesn't actively look at
the applications or content that its customers download over the
network. Obviously, the Comcast-BitTorrent incident seems to conflict
with that assertion. In another incident last year, Comcast
disconnected several high-usage broadband customers. Comcast did
contact them prior to discontinuing their services warning to curb
excessive bandwidth consumption or risk a one-year service termination
but didn't clearly reveal how much bandwidth consumption is allowed.
Why didn't Comcast provide more appropriate disclosure with these two
incidents?
Answer. As this question is most properly directed to Comcast, we
have shared the question with the company and it has provided the
following response:
Comcast works hard to ensure that its customers have
appropriate disclosure about its need to manage its network in
order to prevent certain uses of the network from degrading the
experience of other customers. Comcast's network management
activities, both with respect to BitTorrent and with respect to
excessive users, are consistent with the disclosures its
customers receive in the Terms of Service (``TOS'') and
Acceptable Use Policy (``AUP'') they are obligated to review
before they may use the service. For years, Comcast's TOS has
specified that Comcast High-Speed Internet service is subject
to ``speed and upstream and downstream rate limitations,'' and
that the service may be used only for ``personal, residential,
non-commercial purposes.'' Similarly, for years Comcast's AUP
has prohibited the use of the service that ``restrict[sl,
inhibit[s], or otherwise interfere[s] with the ability of any
other person . . . to use or enjoy the [s]ervice, including . .
. generating levels of traffic sufficient to impede others'
ability to send or retrieve information.'' And, for years,
Comcast's AUP has required customers to ensure that their ``use
of the Service does not restrict, inhibit, interfere with, or
degrade any other user's use of the Service nor represent . . .
an overly large burden on the network'' Comcast has openly and
readily acknowledged that it manages its network, including
managing traffic that causes congestion as well as reserving
the right to terminate service of those customers who abuse
their service after due notice.
``Transparency'' on network management issues is incredibly
complicated given that Internet applications and services
change constantly. Nevertheless, Comcast works to ensure that
its disclosures on matters such as network management and
excessive usage are timely and in sufficient detail to ensure
transparency to our customers while not providing a roadmap to
those who would seek to defeat these reasonable network
management efforts. Mindful of the views of its customers--and
of policymakers--who have urged that the challenges of network
management and excessive usage he explained better to
consumers, Comcast revised its AUP and FAQs earlier this year
to provide even greater transparency on these subjects. We
provide more details in our response to the next question.
Ultimately, Comcast's network management practices are
undertaken to ensure that its customers continue to receive the
world-class service that they have come to expect from Comcast.
Question 2. Comcast has also recently changed its Terms of Service
in January where it now states the company ``uses reasonable network
management practices that are consistent with industry standards'' and
it temporarily delays peer-to-peer sessions during ``periods of high
network congestion'' which seem vague. Could you elaborate on what the
``industry standards'' are because it seems as if the techniques
Comcast employed with BitTorrent were non-standards based practices--
such as spoofing or falsifying IP packets and infringing on consumer
privacy by inspecting consumers' data to determine which were from the
P2P application?
Answer. As this question is most properly directed to Comcast, we
have shared the question with the company and it has provided the
following response:
To effectuate its current bandwidth management, Comcast `s
network issues instructions called ``reset packets''--which
involve a communication between two IP addresses (and,
importantly, not between two people)--to temporarily delay the
initiation of new P2P file uploads at times of network
congestion.
A ``reset'' is nothing more than a bit in the TCP packet header
that is used to signal that there is an error condition within
the network and that a new connection needs to be established;
the new connection is automatically established by the
application or service initiating the connection. The use of
resets is commonplace. AT&T has noted that ``[t]he `reset'
command has been [around] for more than a quarter century'' and
``is commonly used to enable one computer to abort a TCP
connection with another computer for any of a number of
reasons, such as when the communications between the two
computers become unsynchronized.'' And Richard Bennett, a noted
network engineer, recently described a reset packet as ``the
only machine language [P2P protocols] understand [and] this
type of technique is common in the networking and software
industry where alternatives don't exist.'' It is the same
message that the computer receives when any number of problems
occur during a P2P file transfer, and the computer requesting
the file automatically knows how to process this message and to
retry its request (assuming it has not already downloaded the
file from other computers) without the user having to take any
additional action, just like a fax machine does when it
receives a busy signal. To most end users, these communications
will be virtually imperceptible, and, especially in the case of
properly functioning P2P protocols, will have no perceptible
effect on the end user's experience.
Comcast does not inspect the content of data packets traversing
its network, and does not treat data packets differently based
on their content. Rather, Comcast, like many other ISPs,
inspects the data packets only to the extent necessary to
determine whether the packet will cause damage to the network
or otherwise degrade the consumer experience. Inspecting data
packets to determine whether they are sent by a particular P2P
protocol that causes excessive congestion is no different than
inspecting the packets to determine whether they contain
malicious code, such as viruses, worms, spam, or other firms of
malware. Other network functions, including, in some cases,
proper routing of the packets, also require this kind of packet
inspection. In all cases, such inspection is reasonably limited
to look no further than necessary than to determine whether the
transmission is using a P2P protocol that causes excessive
congestion that can degrade other customers' Internet
experiences. There are no privacy implications in such packet
inspections.
Finally, we are engaging with the broad Internet community
through the Internet Engineering Task Force (IETF) to review
how and why we implemented our current bandwidth management
practices, and to consult with them on alternative approaches,
including efforts to make P2P technologies more bandwidth-
efficient.
Question 3. Don't certain networking protocols and standards, such
as Transmission Control Protocol (TCP), already employ congestion
control mechanisms, so why add an additional layer?
Answer. Different network operators have different reasons for
employing their particular set of network management techniques and
strategies. The merits, feasibility, and effectiveness of using
particular congestion management techniques such as traditional TCP
congestion controls versus using more innovative approaches are very
complex technical issues that many of the greatest minds in the
Internet community are currently debating. NCTA's member companies work
hard to ensure that their customers receive a world-class service, and
need the flexibility to use the network management practices that best
address their particular circumstances to continue to deliver the type
of service that their users expect and deserve.
Question 4. MIT Scientist David Clark recently voiced frustration
about the lack of availability of data and information on network usage
from the Internet service providers in order to conduct studies on some
of the network problems that exist. Mr. Clark gave one example where he
could not get one domestic ISP to provide any useful information for
his study on residential high-usage broadband users--this in light of
offering to keep the ISP's data completely anonymous. There also seemed
to be similar reluctance from industry with crafting national broadband
mapping policy--to improve the accuracy of the data so consumers and
businesses know where broadband is offered and ISPs know where demand
is. Why this constant reluctance, even when the data would remain
anonymous?
Answer. We know and respect Dr. Clark's work. Various of our
companies have spoken with Dr. Clark and others in the academic
community about the challenges of sharing such data, and we are hopeful
that this can be worked out with all ISPs. For ISPs, understanding
customer usage patterns is an important part of devising solutions for
network management. Of course, network usage data is confidential and
competitively sensitive, and there may be privacy issues raised by
allowing third parties to have access to such data. Moreover, any
network management solution needs to be designed to function with the
specific technology each provider has implemented in its network.
We respectfully disagree with the suggestion that the cable
industry has been reluctant to craft a national broadband mapping
policy. The cable industry has consistently demonstrated its commitment
to policies that ensure all Americans have access to affordable
broadband. Cable supports Senator Inouye's Broadband Data Improvement
Act because we believe that improving Federal data collection and
dissemination regarding where broadband services have been deployed in
the United States is necessary in order to achieve the goal of
ubiquitous broadband availability for all Americans. And cable
companies have cooperated with programs under the aegis of Connected
Nation on state broadband mapping efforts.
Question 5. If we don't have this information then how can we
properly address the problems we're facing, whether from standards
development, regulatory, or a policy perspective?
Answer. As noted above, cable fully supports broadband mapping
legislation, but we believe that network usage data is better evaluated
by individual network providers.
Question 6. You've stated ``various estimates are that as few as 5
percent of customers use from 50 to 90 percent of the total capacity of
the network.'' But where is the industry data to support this claim?
Answer. The following from the FCC record:
AT&T Comments, WC Docket No. 07-52, at 14-15 (quoting David
Vorhaus, Yankee Group, Confronting the Albatross of P2P 1-2 (May 31,
2007)):
P2P traffic ``constitutes approximately 60 percent of all
traffic that traverses the public internet'';
``BitTorrent alone accounts for roughly 40 percent of all
bandwidth'';
``[i]n times of peak usage, bandwidth-hogging users sharing
large files over P2P can push networks to their absolute
limit''; and
``[t]his problem is poised to worsen in the coming years''
because, ``[a]s content owners migrate more video content to IP
networks, bandwidth demand will inevitably skyrocket.''
``In the absence of the broadband management practices, as few as 5
percent of users dictate the terms on which the remaining 95 percent of
users get access to broadband.'' CTIA Reply Comments, WC Docket No. 07-
52, at 3 (citing CTIA Comments at 12 (citing Steven Levy, ``Pay Per
Gig'', The Washington Post, D1 (Jan. 30, 2008) and David Vorhaus,
Confronting the Albatross of P2P, Yankee Group (May 31, 2007)).
``In a recent study of average data usage on its high speed
wireless EvDO mobile broadband network, Sprint Nextel learned that a
subset of end users, approximately 3 percent, accounted for more than
50 percent of the total data usage on the network. During busy hours, a
mere 1 percent of end users generates 42 percent of data traffic and is
affecting performance for all other users. While the demands of these
users may not have a significant impact at 3 a.m., they do affect the
other 99 percent of end users during the peak busy hours of 8 p.m. and
midnight. If Sprint Nextel took no action to manage its network two or
3 percent of its total end users could exhaust the network, leaving
little or no capacity for the remaining 98 percent.'' Sprint Reply
Comments, WC Docket No. 07-52, at 6.
NBC Universal Reply Comments, WC Docket No. 07-52:
Five percent of Internet users consume at least 60 to 70
percent of network capacity through P2P file sharing. 90
percent of this traffic consists of illegal, pirated content.
Too many parties in this proceeding are ignoring the obvious
reality that the scale of illegal conduct is enormous and the
Commission must allow network operators to combat this. (1-2)
Commission Deborah Taylor Tate referenced piracy in her
opening statement on February 25, 2008, and her concerns are
well-founded. There is overwhelming and undisputed evidence
that massive copyright infringement takes place on P2P
networks. (3)
In 2005 CacheLogic presented figures to the Federal Trade
Commission that P2P represented 60 percent of Internet traffic
at the end of 2004 and is still growing. (5)
A Sandvine report had similar conclusions. In Europe
upstream P2P traffic represents up to 85 percent of all
bandwidth consumed on broadband provider networks. Downstream
P2P traffic represents about 60 percent of bandwidth consumed.
In the U.S. and U.K. upstream traffic amounts to 76 percent and
downstream 48 percent. (5)
Time Warner Cable announced that fewer than 5 percent of its
users account for 60-70 percent of their network capacity--all
through P2P applications. Other commentators have noted that
this can reach as high as 90-95 percent during peak times. (5-
6)
``As the record makes clear, P2P traffic constitutes a clear
majority of all Internet traffic. . . . Indeed, several observers
suggest that P2P traffic now accounts for about 60 percent of all
Internet traffic.'' USTA Reply Comments, WC Docket No. 07-52. at 6
(citing numerous sources including Christopher S. Yoo, Network
Neutrality and the Economics of Congestion, 94 Geo. L. J. 1847, 1878
n.145 (2006) (citing six sources which attribute up to 73 percent of
upstream traffic and 60 percent of overall traffic to peer-to-peer file
sharing)).
``A study of Internet traffic between August and September 2007
confirmed that P2P applications produce more Internet traffic than all
other applications combined and represent up to 89 percent of traffic
in certain parts of the world. The restrictive ruling that certain
parties in this proceeding request would, in effect, hinder the ability
of content providers to offer their services to all subscribers just to
satisfy the unreasonable network demand of a fraction of end users.''
Viacom Reply Comments. WC Docket No. 07-52, at 12.
``Numerous groups have highlighted the significant--negative--
impact of P2P on America's broadband infrastructure. Estimates are that
as much as 90 percent of traffic at a given time can be occupied by
just a small percentage of users of P2P. Other analyses have shown that
as few as 15 users within a geographic area using P2P can demonstrably
degrade the Internet experience for the rest of the community. The
Yankee Group estimates that P2P `can push networks to their absolute
limit' during times of peak usage. According to the network engineer
Richard Bennett, `[t]he fundamental design goal of BitTorrent is to use
up all available bandwidth.' Others contend that P2P `will sop up the
majority of available bandwidth.' '' National Black Chamber of Commerce
et al. Reply Comments, WC Docket 07-52, at 3-4.
George Ou 4/14/08 Written Testimony Generally
Question 7. Can you provide the raw data to support this or
elaborate on the sources of the estimates you cite?
Answer. See above.
Question 8. Comcast has made the assertion that the FCC has no
legal power to stop them from engaging in what it calls ``reasonable
network management'' even if Comcast's behavior was deemed inconsistent
with the Internet Policy Statement. Further more, Comcast states that
given cable modem service is an information service not a
telecommunications service, that any attempt to justify an injunction
on Comcast based on a statutory provision that is explicitly limited to
common carriers would violate the Communications Act and be arbitrary
and capricious. If this is true, how can the FCC effectively prevent or
enforce, in a swift manner, unreasonable or discriminatory practices
related to broadband or network management?
Answer. There is no doubt that the FCC's Internet Policy Statement
is not binding and enforceable today. Indeed, the Chairman of the FCC
acknowledged that fact explicitly when the FCC issued it, expressly
stating that the FCC was not adopting enforceable rules. Whether or not
the FCC has the legal authority to adopt enforceable rules that
regulate network management practices is currently an open question,
and is being considered by the FCC in an ongoing proceeding. I would
also note that the FTC has also claimed authority to address
anticompetitive practices by network operators.
______
Response to Written Questions Submitted by Hon. Jim DeMint to
Kyle McSlarrow
Question 1. Many people today have cited a time when ``net
neutrality'' principles were enforced through common carrier
regulations. Have cable modem services ever been treated under common
carrier regulations?
Answer. No. There was a short period in which the underlying
transmission component of cable modem service was considered a common
carrier offering, but only in the 9th Circuit, as a result of that
court's ruling in AT&T v. City of Portland, 216 F.3d 871 (2000).
Notably, even this ruling did not apply common carrier regulation to
cable modem service itself. Less than 2 years after City of Portland,
the FCC issued a declaratory ruling holding that neither cable modem
service nor the underlying broadband transport was subject to common
carrier regulation. In NCTA v. Brand X Internet Services, 545 U.S. 967
(2005), the Supreme Court not only upheld the FCC's ruling, but also
held that the ruling superseded the 9th Circuit's decision.
Question 2. We hear a great deal about a lack of availability of
broadband service in the United States, but your testimony indicates
that cable broadband service is now available to 92 percent of
Americans. How many years has it taken to reach this level?
Answer. Cable operators have invested $130 billion since 1996 to
build fiber optic networks that have brought high-speed Internet access
to more than 92 percent of the United States.
Question 3. How much public subsidy has been used to reach this
level?
Answer. Other than a small amount of funding through the E-Rate
program to wire schools and libraries, cable operators have relied on
private risk capital to deploy their networks.
Question 4. How do you feel the efforts of the cable industry
comport with Mr. Lessig's model of abundance?
Answer. Contrary to Mr. Lessig's suggestion, cable operators in
fact have adopted a ``business model of abundance and neutrality,'' in
which providers offer ``whatever legal applications and content users
and innovators want.'' If cable operators pursued the model of
``scarcity and control'' he claims we do, they would soon lose
customers to other providers of broadband service. It is clearly
unnecessary to enact legislation imposing any particular business
model, and doing so would deprive network operators of the flexibility
they need to innovate and respond to customer demand.
Question 5. Many people belittle the competition that exists
between cable companies and telephone companies in the broadband market
today, as well as the competition provided by wireless and satellite
providers. Could you provide your view on the state of competition, and
what impact that competition has on consumers?
Answer. Broadband services arc intensely competitive, with cable
operators, telephone companies, satellite providers, wireless network
operators, mobile service providers and others investing, innovating
and competing with one another. In this environment, cable operators
are striving to give consumers the best Internet experience they can,
at the best value.
Question 6. You've stated ``various estimates are that as few as 5
percent of customers use from 50 to 90 percent of the total capacity of
the network.'' But where is the industry data to support this claim?
Answer. There are no hard and fast rules with regard to estimates
of bandwidth consumption, thus the reasoning behind referencing a range
in the testimony. One reason for the wide range of estimates reported
may be the difficulty in detecting certain types of protocols of
Internet traffic. Some P2P clients now incorporate protocol obfuscation
using encryption and similar methods to hide from detection. Therefore
some of the studies or estimates may not actually be detecting all of
the P2P and other bandwidth intensive activities that are actively
taking measures to fly under the radar.
The core of the bandwidth consumption statement came from an
Ellacoya Networks study.\1\ It should be noted that this finding was
not exclusively addressing P2P, but it did cite P2P as the primary
high-bandwidth application. The testimony also cited recent experience
in Japan, where 1 percent of broadband users, using P2P, account for
roughly 47 percent of total consumption, and 10 percent of users, using
P2P, account for 75 percent of total consumption.\2\ Many other studies
and knowledgeable entities have disclosed findings about inordinate
bandwidth consumption, often as a result of P2P usage. Included among
these are:
---------------------------------------------------------------------------
\1\ No free lunches on the Net; Research conducted by Ellacoya
Networks shows that up to 5 percent of broadband subscribers can
consume nearly 90 percent of network bandwidth, primarily by using
high-bandwidth applications such as streaming media and, especially,
file sharing. These demands are more than doubling network capacity
requirements each year. http://news.cnet.com/2010-1034_3-
6068868.html?part=rss&tag=6068868&subj=news.
\2\ Testimony of George Ou; FCC Broadband Industry Practices
Hearing; Stanford University; April 17, 2008; ``Recently, the Japanese
Ministry of Internal Affairs and Communications released a study
showing that just 1 percent of Japan's broadband users using P2P
account for roughly 47 percent of Japan's Internet usage. Furthermore,
only 10 percent of Japan's broadband users using P2P account, on
average, for 75 percent of all Internet usage.'' http://
www.lanarchitect.net/Files/Network_Management_n_Internet.doc
ipoque study \3\
---------------------------------------------------------------------------
\3\ Nocturnal P2P transmissions account for 95 percent of Internet
traffic; http://arstechnica.com/news.ars/post/20071128-nocturnal-p2p-
transmissions-account-for-95-percent-of-internet-bandwidth.html link to
ipoque study; http://www.ipoque.com/userfiles/file/
Internet_study_2007_abstract_en.pdf
P2P apps can account for an astonishing 95 percent of
---------------------------------------------------------------------------
all nighttime traffic
P2P sucks up anywhere between 49 and 83 percent of all
Internet traffic during the day, and can spike much higher
at night
Virgin Media \4\
---------------------------------------------------------------------------
\4\ Virgin Media website--Traffic Management--how do we know this
will work?
During our busiest times in the evening, we have noticed
that some applications (for example Peer to Peer file sharing
applications) use significant amounts of bandwidth, often at the
expense of critical Internet services like browsing the Web or using e-
mail.
We found that this small minority of customers were
actually downloading enough information to significantly affect the
service for other customers' broadband service. To put it another way,
just 5 percent of customers were accounting for around 70 percent of
data downloaded at peak times.
http://www.virgin.net/allyours/faqs/traffic_faqs.html#cut_costs
5 percent of customers accounting for 70 percent of
---------------------------------------------------------------------------
data downloaded at peak times
Yankee Group analyst David Vorhaus \5\
---------------------------------------------------------------------------
\5\ When Capacity is Never Enough; http://www.multichannel.com/
article/CA6544099.html
Cable operators report that 60 percent to 75 percent of
their Internet traffic is being generated by P2P file-
---------------------------------------------------------------------------
sharing.
Vorhaus estimates that 5 percent to 10 percent of
Internet users are generating 80 percent to 90 percent of
this P2P traffic.
UC Irvine \6\
---------------------------------------------------------------------------
\6\ Bandwidth! How The Residential Network Is Handling It; http://
resnet.uci.edu/band
widthFAQ.asp
Prior to installing traffic management hardware, about
2 percent of the residents would use over 90 percent of the
available bandwidth, causing slowdowns and poor performance
---------------------------------------------------------------------------
for everyone.
Cisco Systems \7\
---------------------------------------------------------------------------
\7\ Global IP Traffic Forecast and Methodology, 2006-2011-Cisco
Systems; http://www.cisco
.com/en/US/solutions/collateral/ns341/ns525/ns537/
net_implementation_white_paper0900
aecd806a8laa.pdf
P2P comprised 54 percent of global Internet traffic in
---------------------------------------------------------------------------
2007
CacheLogic \8\
---------------------------------------------------------------------------
\8\ P2P File Sharing--The Evolving Distribution Chain-CacheLogic
presentation; note chart on slide 3; http://www.cisco.com/en/US/
solutions/collateral/ns341/ns525/ns537/net_implemen
tation_white_paper0900aecd806a81aa.pdf
More than 60 percent of consumer Internet traffic is
---------------------------------------------------------------------------
P2P
And finally, it should also be noted that SafeNet Inc. estimates
that 90 percent of P2P downloads are still of illegally copied
content.\9\
---------------------------------------------------------------------------
\9\ Peer-to-peer networks go legit, but piracy is still rampant;
http://www.siliconvalley.com/latestheadlines/
ci_8575851?nclick_check=1&,forced=true
---------------------------------------------------------------------------
In addition, see the following from the FCC record:
AT&T Comments, WC Docket No. 07-52, at 14-15 (quoting David
Vorhaus, Yankee Group, Confronting the Albatross of P2P 1-2 (May 31,
2007)):
P2P traffic ``constitutes approximately 60 percent of all
traffic that traverses the public internet'';
``BitTorrent alone accounts for roughly 40 percent of all
bandwidth'';
``[i]n times of peak usage, bandwidth-hogging users sharing
large files over P2P can push networks to their absolute
limit''; and
``[t]his problem is poised to worsen in the coming years''
because, ``[a]s content owners migrate more video content to IP
networks, bandwidth demand will inevitably skyrocket.''
``In the absence of the broadband management practices, as few as 5
percent of users dictate the terms on which the remaining 95 percent of
users get access to broadband.'' CTIA Reply Comments, WC Docket No. 07-
52, at 3 (citing CT1A Comments at 12 (citing Steven Levy, ``Pay Per
Gig", The Washington Post, D1 (Jan. 30, 2008) and David Vorhaus.
Confronting the Albatross of P2P, Yankee Group (May 31, 2007)).
``In a recent study of average data usage on its high speed
wireless EvDO mobile broadband network, Sprint Nextel learned that a
subset of end users, approximately 3 percent, accounted for more than
50 percent of the total data usage on the network. During busy hours, a
mere 1 percent of end users generates 42 percent of data traffic and is
affecting performance for all other users. While the demands of these
users may not have a significant impact at 3 a.m., they do affect the
other 99 percent of end users during the peak busy hours of 8 p.m. and
midnight. If Sprint Nextel took no action to manage its network two or
3 percent of its total end users could exhaust the network, leaving
little or no capacity for the remaining 98 percent.'' Sprint Reply
Comments, WC Docket No. 07-52, at 6.
NBC Universal Reply Comments, WC Docket No. 07-52:
Five percent of Internet users consume at least 60 to 70
percent of network capacity through P2P file sharing. 90
percent of this traffic consists of illegal, pirated content.
Too many parties in this proceeding are ignoring the obvious
reality that the scale of illegal conduct is enormous and the
Commission must allow network operators to combat this. (1-2)
Commission Deborah Taylor Tate referenced piracy in her
opening statement on February 25, 2008, and her concerns are
well-founded. There is overwhelming and undisputed evidence
that massive copyright infringement takes place on P2P
networks. (3)
In 2005 CacheLogic presented figures to the Federal Trade
Commission that P2P represented 60 percent of Internet traffic
at the end of 2004 and is still growing. (5)
A Sandvine report had similar conclusions. In Europe
upstream P2P traffic represents up to 85 percent of all
bandwidth consumed on broadband provider networks. Downstream
P2P traffic represents about 60 percent of bandwidth consumed.
In the U.S. and U.K. upstream traffic amounts to 76 percent and
downstream 48 percent. (5)
Time Warner Cable announced that fewer than 5 percent of its
users account for 60-70 percent of their network capacity--all
through P2P applications. Other commentators have noted that
this can reach as high as 90-95 percent during peak times. (5-
6)
``As the record makes clear, P2P traffic constitutes a clear
majority of all Internet traffic. . . . Indeed, several observers
suggest that P2P traffic now accounts for about 60 percent of all
Internet traffic.'' USTA Reply Comments, WC Docket No. 07-52, at 6
(citing numerous sources including Christopher S. Yoo, Network
Neutrality and the Economics of Congestion, 94 Geo. L. J. 1847, 1878
n.145 (2006) (citing six sources which attribute up to 73 percent of
upstream traffic and 60 percent of overall traffic to peer-to-peer file
sharing)).
``A study of Internet traffic between August and September 2007
confirmed that P2P applications produce more Internet traffic than all
other applications combined and represent up to 89 percent of traffic
in certain parts of the world. The restrictive ruling that certain
parties in this proceeding request would, in effect, hinder the ability
of content providers to offer their services to all subscribers just to
satisfy the unreasonable network demand of a fraction of end users.''
Viacom Reply Comments, WC Docket No. 0752, at 12.
``Numerous groups have highlighted the significant--negative--
impact of P2P on America's broadband infrastructure. Estimates are that
as much as 90 percent of traffic at a given time can be occupied by
just a small percentage of users of P2P. Other analyses have shown that
as few as 15 users within a geographic area using P2P can demonstrably
degrade the Internet experience for the rest of the community. The
Yankee Group estimates that P2P `can push networks to their absolute
limit' during times of peak usage. According to the network engineer
Richard Bennett, `[t]he fundamental design goal of BitTorrent is to use
up all available bandwidth.' Others contend that P2P `will sop up the
majority of available bandwidth.' '' National Black Chamber of Commerce
et al., Reply Comments, WC Docket 07-52, at 3-4.
George Ou 4/14/08 Written Testimony Generally
______
Response to Written Questions Submitted by Hon. Daniel K. Inouye to
Professor Lawrence Lessig
Question 1. Since 2003, the FCC has been reclassifying broadband
services as Title I services under the Communications Act. In 2005, the
Supreme Court upheld this approach in its Brand X decision. In light of
the FCC's reclassification of broadband services and the Supreme Court
subsequently deciding that this approach passes legal muster, do you
believe the FCC has adequate authority to stop broadband network
providers from engaging in unfair discrimination?
Answer. I do believe that Brand X means the FCC has the authority
to stop broadband network providers from engaging in unfair and
innovation-harming discrimination. But I believe that network providers
will challenge that authority, unnecessarily delaying the FCC's efforts
to protect against discrimination. I therefore think clarifying
legislation by Congress would be helpful.
Question 2. Broadband capacity plays an important role in the
network neutrality and network management discussion. To this end, I
would like to ask two questions: Can we worry less about discrimination
or content favoritism if there is more broadband network capacity?
Answer. Yes, we can worry less, at least about discrimination or
favoritism. The FCC must continue to be concerned about blocking
certain applications.
Question 2a. Can broadband network providers add capacity fast
enough to meet consumer demand?
Answer. There is no technical reason providers can't add capacity
to meet consumer demand. My concern is that providers are withholding
capacity until they are confident of a regulatory environment in which
they can discriminate in ways that will ultimately harm innovation.
______
Response to Written Questions Submitted by Hon. Byron L. Dorgan to
Professor Lawrence Lessig
Question 1. Are we in danger of seeing the old media cartel
reappear in new media?
Answer. Yes. The pattern of new media captured by old is as old as
media, and the pattern of that recapture is well settled. Current
practices by network providers match that pattern, and without
sufficient resistance by the FCC, the incentive will certainly be to
reestablish that ``cartel.''
Question 2. Does current law or agency authority provide adequate
protections to prevent the Internet from becoming a closed network
similar to cable television, instead as opposed to the open platform
the Internet was developed to be?
Answer. Authority alone won't prevent anything. Unless the FCC
takes a clear policy stand, expressed in enforceable regulations,
ideally backed up by a clear demand by Congress, network providers will
continue to angel for a network over which they exercise a power to
discriminate that can't help but weaken innovation in applications and
content.
Question 3. Is the current regulatory structure sufficient to meet
the needs of the Internet?
Answer. The FCC has the means, if it has the will. But I believe it
is a mistake to trust the future of the Internet to the policy
preferences of unelected FCC commissioners. It is Congress's job to set
the policy of the FCC, and Congress has not adequately charged the FCC
with the requirement that it assure network neutrality.
Question 4. Representatives of the phone and cable companies have
consistently argued that if Congress were to impose a nondiscrimination
rule, network operators would not deploy broadband networks. Isn't this
a false choice? Why can't we have an open Internet and world class
deployment?
Answer. Network providers in every major industrialized nation
comparable to the United States face more restrictive regulatory
obligations than are being discussed in network neutrality regulations,
yet providers in those countries have deployed better--faster,
cheaper--broadband networks. This does suggest these representatives
have presented a false choice--unless there is some reason to believe
American network providers are less capable than, for example, French
network providers.
Question 5. Recently, Comcast announced that it is engaging in
conversations with Bit Torrent, Inc. and Pando Networks, which
distribute content through Bit Torrent applications. Does this
demonstrate that the marketplace is addressing the concerns raised by
consumers?
Answer. Not in a way that would in any sense address the
competitive and innovation concerns raised by Comcast's behavior. If
innovators have to strike a deal with network providers be-fore their
innovation can be released on the network, innovation on the Internet
would be radically constrained.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
Professor Lawrence Lessig
Question 1. The last time you testified before the Committee, you
expressed concerns about the potential `cablelization' of the Internet.
Two years later do you see signs that it is occurring?
Answer. Absolutely. By ``cablelization,'' I meant the move to an
Internet where providers: (1) face no legal obligation of neutrality or
access, and (2) operate under a norm that expresses the idea that the
network owner has an absolute right to control the content (or
applications) on ``their'' network. Both aspects of that definition
have only been reinforced in the past 2 years.
Question 2. In your testimony, you cite the electricity grid as a
fundamentally neutral network. As you know, there are a handful of
trials being conducted overseas where broadband providers are charging
consumers on a per-packet basis similar to how utilities price
electricity on a per-kilowatt hour basis. Do you believe such an
Internet business model is viable? Would charging on a per-packet basis
provide a financial disincentive for the small group of heavy bandwidth
users that some broadband providers are concerned about?
Answer. I certainly do believe that business model is viable, and
that it would not violate the appropriate norms of network neutrality,
even while I very much hope that it does not become the dominant model
for providing access to the Internet. My concern is that by failing to
impose ``open access'' obligations on broadband providers, both cable
and telecom, we don't have sufficient ISP competition to guarantee that
alternatives to this per-packet model will have a chance to flourish.
Question 3. I have heard you argue that ``fast lanes'' on the
Internet are only valuable if ``slow lanes'' are really slow. This
approach can create a perverse incentive among network providers not to
build the fastest network possible and an incentive to maintain
bottlenecks. In light of the response Verizon has received from Wall
Street for its FIOS rollout, do you believe that broadband providers
have the incentive to upgrade their networks?
Answer. It is clear Wall Street will reward investment decisions
that maximize the short term return to broadband providers--whether or
not those decisions maximize long term broad-band growth for the
Nation. For that reason, I think it is a fundamental mistake for
Congress to look to Wall Street's ratings as a guide for good public
policy. The innovators who would lose from a non-neutral network (the
next Google's, or Facebooks), don't yet have Wall Street analysts
focusing on them. Congress should insist on a broadband policy that
benefits long term innovation and growth, and once that policy is set,
adjust incentives in providers are not building networks sufficiently
quickly.
Question 4. Dr. Hahn argues in his testimony that experimentation
with new business models is the key to Internet innovation at both the
``core'' and the ``edge'' of the network, and the deployment of more
intelligent networks needed to handle rapidly growing Internet traffic.
In your opinion, would net neutrality rules prevent innovation at the
core of the network or prevent the deployment of more intelligent
networks?
Answer. I was confused by Dr. Hahn's testimony, as he was using the
term ``core'' and ``edge'' in a way that is inconsistent with the
standard terminology among network theorists and economists. As these
terms are ordinarily used: It is clear that network neutrality
regulations would have absolutely no effect on innovation in ``edge''
technologies. The only ``core'' technologies network neutrality
legislation would affect would be those that harmed network neutrality.
Thus, for example, some quality of service techniques would be
inconsistent with network neutrality principles, but all would not.
Question 5. If U.S. network operators do end up charging content
providers a second fee for delivering a differentiated quality of
service to their customers, I am deeply concerned that net-work
operators in other nations will follow suit. Given that, in many
nations, the government owns a percentage, if not all, of the single,
largest network provider, American companies exporting on-line content
and services will find themselves paying an additional tax, and thus be
placed at a competitive disadvantage with preferred content and service
local champions. Do you know how other nations view net neutrality?
Answer. Most other nations have not had to confront network
neutrality concerns because they have imposed a more onerous set of
regulatory obligations, similar to the ``open access'' regulations that
the FCC imposed on telecom providers in the late 1990s. Because those
regulations tend to create significant ISP competition, the need to
police neutrality on the network has proven to be less. If these other
nations remove ``open access'' requirements, however, I would be
concerned about the effect on American providers for precisely the
reasons outlined.
______
Response to Written Questions Submitted by Hon. Amy Klobuchar to
Professor Lawrence Lessig
Question 1. You said in your prepared remarks that today's venture
capitalists need certainty about the future of the internet. That is,
they need to now today how the Internet will be managed tomorrow.
Without that certainty, you claim these venture capitalists will be
less likely to invest in new Internet technologies. What will give
these venture capitalists certainty?
Answer. The only thing that would provide this certainty is if the
policymaker charged with setting Internet and communications policy
generally set this policy as a fundamental principle for communication
regulators. In my view, it is Congress, and not the FCC, that is
charged with setting that policy.
Question 2. Can you provide an example, or examples, of innovators
holding back on inventions and/or advancements in Internet technology
because of uncertainty surrounding the future of network neutrality?
Answer. As these are innovators whose ideas die on the venture
capitalist's boardroom table, they are not public or common knowledge.
My own research in this area has been informed by these venture
capitalists, and their own account of the factors they use to evaluate
funding proposals. The basic economics behind their calculation is not
obscure, however: Increased strategic freedom for network providers
increases the strategic risk for investments. Increased risks lowers
the number of efficient investments.
______
Response to Written Questions Submitted by Hon. Olympia J. Snowe to
Professor Lawrence Lessig
Question 1. It has been stated numerous times that there isn't
sufficient broadband ISP competition. While some markets (more
metropolitan and urban areas) do have robust competition, most markets
have an effective duopoly that controls access to high speed Internet
connections. How would you assess the current direction of broadband
competition given the emergence of wireless broadband and broadband
over power lines (BPL) services? Is competition growing?
Answer. Competition is growing, but I don't believe quickly enough,
or with the right business model. The long term threat to the Internet
comes from platform providers with a business model that depends upon
leveraging value out of Internet applications and content. The long
term solution is broadband providers who, like providers of
electricity, have no interest in the content or applications running on
the network.
Question 2. Why isn't there more competition in the Broadband
space? What barriers to entry are hindering new entrants?
Answer. No doubt the most important barrier is the high cost of
building infrastructure. But the government could take steps to
encourage more competition. Securing more reliable access to local
right of ways would be one. More unlicensed (or effectively so)
spectrum would be another. A return to some of the ``open access''
policies of the late 1990s would be a third. I would strongly encourage
the first two.
Question 3. What specific recommendations do you have for us to
craft effective policy that would promote more competition in this
market space?
You have mentioned that this innovation has come primarily from the
``edge'' or ``end'' of the network through application competition. And
that the original Internet embraced an ``end-to-end'' design, meaning
the network itself was to be as simple as possible, with intelligence
for the network provided by applications that connected at the edge of
the network. But given this ``edge innovation'' has created new
Internet services and applications, and content has become more dynamic
and larger as well as more time-sensitive with the increasing
prevalence of voice and video traffic, doesn't the network itself have
to become more intelligent to deal with the dizzying array of content
and to ensure efficient delivery of the content and successful use of
the applications and services?
Answer. No. The truth of the end-to-end design didn't depend upon
the simplicity of the applications on the network. It reflects a
technical judgment about where in the network it is most efficient to
locate network-like services (the ``ends''). But the consequence of
that technical design was a platform that maximized the range of
competition that was possible on that network.
Question 4. There has been an explosion of bandwidth intensive
content--primarily with video. Broadband providers seem to constantly
be playing catch-up in upgrading their infrastructure to meet the
growing demand. While broadband providers can do more, what are content
and application providers doing in developing new technologies to
assist in dealing with the near-term bandwidth shortage that may exist
in certain areas--such as utilizing compression technologies or using
multicasting over P2P?
Answer. P2P itself is a technology to more efficiently use network
resources, by sharing the performance requirements among a number of
different uses. But more fundamentally, I don't think the government
can do anything in particular to encourage one kind of technical
development over another, and nor should it. The most (and least) the
government should do is create the right competitive environment for
the market in applications and content to flourish.
Question 5. Are content and applications providers designing their
products around current network constraints that exist?
Answer. Yes, as they always will, as there will always, on the
margin, be a constraint. The problem is the constraint now is so
significant that the work-arounds are too severe, weakening competitive
opportunity.
______
Response to Written Questions Submitted by Hon. Jim DeMint to
Professor Lawrence Lessig
Question 1. When you testified before this Committee in 2006, you
stated that network neutrality has been part of telecommunications law
for 40 years. However, the Internet backbone has never been subject to
network neutrality regulations or principles. And Mr. McSlarrow's
member-companies have never been subject to network neutrality
regulations or principles.
How could network neutrality principles be such an integral part of
how the Internet has operated when neither backbone providers nor cable
modem services, which still have more broadband customers than any
other type of broadband service, have ever been subject to network
neutrality requirements?
Answer. It is correct that backbone providers haven't been subject
to legal regulation. But the competitive environment they have operated
within has never given them the incentive to discriminate in ways that
weaken the end-to-end character of the Internet's design. My point was
that Title II Internet services--the core of early network growth--had
been subject to a range of regulations that drove providers away from a
discriminatory business model, which effected neutrality.
Question 2. I know you work with Tim Wu on these issues. Dr. Wu
made the following comment in The Economist a year ago when talking
about net neutrality:
Answer. ``The public reaction has already been as powerful and
effective as any law,'' says Timothy Wu, a professor at Columbia Law
School who is credited with coining the term ``net neutrality''. The
debate has put the telecoms companies on notice that they are being
watched closely, he says, and has forced them to make public pledges
not to block or degrade access. ``Shame can have more power than
litigation,'' says Mr Wu. ``The market and consumers can control bad
practices, but consumers actually have to be aware of what is going on
for that to happen.''
Question 3. Why can't the market (including Internet companies,
application providers, consumers, and a vigilant FCC, monitoring
activities) work in ensuring that bad actors are stopped?
Answer. Investment decisions will be based upon the expectation of
the competitive environment at the time when the investment needs to
earn a return. My view is that a clear Federal policy would more
effectively signal the competitive environment in the future than the
(often fickle) attitudes of public activism. Of course, there's no way
to be certain. It may well be that the activists would be sufficient.
But that work is complemented by clear Federal policy signaling the
values this infrastructure will require.
Question 4. Why do we need more regulation today?
Answer. In my view, the government should adopt a minimal
additional regulation to assure that business models that depend upon
scarcity do not develop. That addition would complement the Internet
Freedoms currently embraced by the FCC, by adding a requirement that
any tiering done by an Internet provider be offered on similar terms to
any other provider. So if a provider charges a premium price for video
content, it would have to offer that same price to anyone. That
additional regulation focuses upon contracts; it doesn't require
additional supervision of technology. And it puts significant pressure
on a business model that envisions leveraging rents out of network
scarcity.